Factbox-Highlights of Germany's 2026 Budget

Highlights of Germany's 2026 Budget and Fiscal Changes

By Maria Martinez

BERLIN (Reuters) -Germany's parliament will pass the 2026 budget on Friday with soaring borrowing levels, marking a dramatic shift away from decades of fiscal discipline.

Here are the highlights:

THE KEY NUMBERS IN GERMANY'S 2026 CORE BUDGET

The budget approved by Germany's budget committee features total spending of 524.5 billion euros ($607.69 billion) in the 2026 core budget, including 58.3 billion euros in investments.

The core budget envisages borrowing of 97.9 billion euros.

WHAT HAPPENS WITH THE SPECIAL FUNDS?

The investment increase is possible thanks to a special 500 billion euro infrastructure fund and an exemption from debt rules for defence spending approved in March.

Germany's debt brake limits borrowing to 0.35% of gross domestic product and special funds are excluded from it.

Including investments through special funds, total investment rises to 126.7 billion euros, marking a 10% increase over 2025 and following a 55% increase this year from 2024.

HOW INDEBTED WILL GERMANY BE?

The conservative-Social Democrat coalition government plans borrowing of 97.9 billion euros in 2026 in the core budget.

Adding borrowing through the special funds for infrastructure and defence, total new debt will be well over 180 billion euros, a level surpassed only during the coronavirus pandemic in 2021 with over 215 billion euros.

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

The deficit is projected to widen to about 4% of GDP by 2027 and debt is projected to rise to around 68% of GDP by 2027, according to an International Monetary Fund forecast, but this is still the lowest level among G7 economies.

PROPPING UP DAY-TO-DAY SPENDING

Germany is using some of the financial firepower to prop up day-to-day spending rather than directing it all towards additional infrastructure.

A Green party analysis said the government has gained 10 billion euros of fiscal leeway for 2026 through the transport sector alone, citing investment in roads and railways.

As an example, the infrastructure fund earmarks 2.5 billion euros in 2026 for the renovation of motorway bridges, while investments for federal trunk roads in the core budget are cut by 1.7 billion from 2024, the year used as benchmark for a study by the German Economic Institute (IW), as it precedes the creation of the special fund in March of 2025.

WHICH MINISTRY WILL BENEFIT THE MOST?

The defence budget will see the largest growth, rising by more than 20 billion euros to 82.7 billion in the core budget. 

Including special defence funds, total defence spending is planned to reach 108.2 billion euros in 2026.

Germany will also raise financial aid to Ukraine to 11.5 billion euros in the 2026 budget, up from 8.5 billion euros previously planned.

WHAT WILL HAPPEN IN COMING YEARS?

Despite the debt brake reform and the new infrastructure fund, big challenges lie ahead in the 2027 and 2028 budgets.

For the 2027 budget, the government is currently assuming a comparatively small funding gap of 11-12 billion euros, while there is shortfall of around 60 billion euros expected in 2028.

($1 = 0.8631 euros)

(Reporting by Maria Martinez;Editing by Alexander Smith)