German parliament passes debt-heavy 2026 budget

BERLIN (Reuters) -Germany's parliament on Friday passed the budget for 2026 with over 180 billion euros ($208 billion) in new debt, outlining how Berlin will use its financial firepower to revive the anaemic economy.

That borrowing level was only surpassed during the pandemic in 2021, with 215 billion euros and is possible thanks to a special 500-billion-euro infrastructure fund and an exemption from debt rules for defence spending approved in March.

The budget features high investment levels aimed at reviving Europe's largest economy after two years of contraction, a strong commitment to defence spending and a 3-billion-euro increase in Ukraine aid.

The core budget, with total spending of 524.5 billion euros, includes 58.3 billion euros in investments.

Including investments through special funds, which are excluded from Germany's debt brake, total investment goes up to 126.7 billion euros, marking a 10% increase over 2025 and following a 55% increase this year from 2024.

Germany's debt brake limits borrowing to 0.35% of gross domestic product.

In the same way, the core budget envisages borrowing of 97.9 billion euros in 2026, but adding borrowing through the special funds for infrastructure and defence, total new debt will be well over 180 billion euros.

It is more than three times the 50.5 billion euros borrowed in 2024 under the previous government.

($1 = 0.8654 euros)

(Reporting by Maria Martinez, editing by Miranda Murray and Thomas Seythal)