Klingbeil Presents 2027 Budget Draft – Record Spending and Record Debt

Defense Minister Boris Pistorius can look forward to a significantly growing budget under the federal government's plans. Around 109.7 billion euros in defense spending is earmarked for 2027 in the core budget; together with funds from the Bundeswehr special fund and other items, defense spending is to rise to 183.7 billion euros by 2030. This represents growth of roughly one-third in the defense budget compared to 2026 – justified by the goal of raising the share of NATO defense spending from the current 2.8 percent to 3.5 percent of economic output by 2029.

Defense Budget Grows Disproportionately

In an ARD summer interview, Klingbeil defended the higher borrowing in strong terms: "Klingbeil said that Germany cannot defend itself against Russian President Putin with a black zero." At the same time, he pointed to the consequences of international crises: "The war begun by US President Trump has dampened growth hopes." The Finance Ministry also justifies the additional spending with the effects of the Iran war, rising energy prices, and a weak economy.

Despite the record spending, most ministries must save. Klingbeil announced that, in addition to the already planned savings of one percent, each ministry should cut a further two percent. Subsidies to the social insurance systems are also to be reduced, and funds from the Climate and Transformation Fund are to be cancelled. Overall, federal investments in 2027 amount to 117.5 billion euros, financed in part through the infrastructure fund for the repair of bridges, roads, and the rail network.

Savings Requirements for All Ministries

The Ministry of Labor and Social Affairs under Bärbel Bas remains the largest single item in the federal budget, with planned spending of around 201.5 billion euros, thus exceeding the 200 billion euro mark for the first time. The Federal Employment Agency will receive an additional 5.2 billion euros to cushion the consequences of the previous year's unemployment. The pension and health insurance systems are also to receive fewer federal subsidies than before.

On the revenue side, the black-red coalition is planning a higher tobacco tax as well as a plastic levy. A higher alcohol tax has also already been set in motion. "Revenues remain miles behind the planned expenditures," the "Südwest Presse" concludes. The opposition has already sharply criticized the draft: Sebastian Schäfer, the Greens' budget policy spokesperson, called it an admission of failure to the dpa.

Criticism from the Opposition and the Greens

Schäfer also accused the government of breaking its promise to use ten billion euros from the special fund for infrastructure and climate neutrality additionally for climate protection: "This means less climate protection, more heat, more drought, and more costs as a consequence of the climate crisis." Klingbeil had previously described the Climate and Transformation Fund as "very chaotic" and pointed to billions already additionally allocated.

Klingbeil emphasized that he had closed the budget gap of 34 billion euros existing at the beginning of the year: "This gap has been closed; he will present a constitutionally compliant budget." Following the cabinet decision, the draft will be deliberated in the Bundestag in September after the parliamentary summer break. Adoption in plenary is scheduled for late November and in the Bundesrat for December, so that the budget can still enter into force before the Christmas break.

According to Finance Ministry calculations, the interest burden from growing federal debt will rise from 41.9 billion euros in 2027 to 80.7 billion euros in 2030. Union parliamentary group vice-chairman Middelberg also warned in Deutschlandfunk that the government must examine the efficiency of public spending more closely going forward: "Every expenditure must make Germany as a location more attractive in order to attract private investment, so that the economy can grow."

Growing Interest Burden and New Gaps

According to the cabinet draft, a new multibillion-euro budget gap threatens as early as 2028: 22 billion euros in 2028, 38 billion in 2029, and 47 billion euros in 2030. In addition, around 6.8 billion euros must be drawn from reserves. New borrowing is therefore around eight billion euros higher than in the plans from spring 2026.

The "Südwest Presse" summarizes in its commentary that the budget makes it abundantly clear why it is urgently necessary to repair infrastructure, modernize the administration, and make the Bundeswehr capable of defense: "It simply costs a great deal of money to restore the dilapidated infrastructure and modernize the administration." It adds: "Even more money goes toward bringing the Bundeswehr into a state that can be described as 'capable of defense.'"

According to the federal government's assessment, the economic framework conditions have deteriorated significantly due to the consequences of the Iran war and the associated higher oil and gas prices. The growth forecast for 2026 has been cut to just 0.5 percent. The opposition criticizes the fact that every eighth euro in the core budget will henceforth be borrowed money. While the recent agreements in the coalition committee show that the black-red coalition is now finally taking action, it remains unclear whether and how the gap in subsequent years can be closed.

Economic Framework Conditions and Outlook

The total volume of the 2027 federal budget – including all special funds – amounts to around 670 billion euros according to the draft. Spending in the current year 2026 is still estimated at 524.5 billion euros. By 2030, the federal government's total new borrowing is to grow to 219.5 billion euros, provided no fundamental policy changes are made.

Klingbeil and Chancellor Friedrich Merz (CDU) are jointly responsible for the budget draft, which now goes into parliamentary deliberations. In the coming months, both must present a constitutionally compliant budget that also reconciles the requirements of alliance defense, infrastructure modernization, and social security.

The level of defense spending is counted toward the debt brake only up to a limit of one percent of gross domestic product – a mechanism that first enables the disproportionate increase in the defense budget. Economic recovery and rising tax revenues remain, in the view of all actors, the decisive precondition for ensuring that the record-high debt does not become a permanent stress test for public finances: "All these efforts will not be sufficient, however, if the economy does not finally pick up again," the "Südwest Presse" writes.