Berlin, Germany. Germany plans to lift borrowing in 2027 to more than €203 billion, according to a budget draft seen by Reuters on Friday, as Berlin increases investment and defence spending amid energy shocks linked to war and years of underinvestment.
The planned borrowing is higher than the €196.5 billion signalled in April and well above the €50.5 billion recorded in 2024 under the previous government.
Higher spending and borrowing plans
The 2027 draft budget, part of a medium-term financial framework running through 2030, allocates total spending of €555.4 billion, compared with €543.3 billion approved in April.
Total investment is set at €117.5 billion, nearly €40 billion more than originally planned. The increase follows approval of a €500 billion fund for infrastructure and a rule change allowing defence spending to be excluded from debt limits.
Economic risks from Middle East conflict
The draft budget assumes the Middle East conflict will ease during the summer. It warns that if the Strait of Hormuz or oil production capacities remain disrupted for longer, there would be “far-reaching consequences” for the German economy.
Infrastructure and climate fund priorities
Germany’s special infrastructure and climate fund will focus mainly on transport, digitalisation and hospital infrastructure, highlighting areas identified by Berlin as requiring urgent modernisation after years of underinvestment.
Defence funding breakdown
New borrowing in the core budget is expected to rise to €118.7 billion, with an additional €54.9 billion borrowed through the infrastructure fund and €30 billion through the special fund for defence approved by former Chancellor Olaf Scholz after Russia’s 2022 invasion of Ukraine. The defence fund ends in 2027.
Core defence spending is set to increase to €109 billion in 2027 from €82 billion in 2026 in the core budget. With €11.6 billion for Ukraine and €9.4 billion in other security-related spending, including civil protection, intelligence and IT protection, total defence spending rises to €130.1 billion after rounding.
Next steps
Cabinet approval of the first draft is expected on Monday, when the budget will be officially presented. After the summer recess, budget discussions are due to begin in parliament in September, with final approval expected by the end of the year.
