Finance
Germany facing budget gaps despite improved tax revenue forecast
Published by Global Banking and Finance Review
Posted on October 23, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on October 23, 2025
2 min readLast updated: January 21, 2026
Germany faces a 140 billion euro budget gap by 2029 despite improved tax revenue forecasts, prompting ministry cuts to balance finances.
By Maria Martinez
BERLIN (Reuters) -Germany is facing a budget gap of more than 140 billion euros ($163 billion) up to 2029 and will need ministries to make cuts, despite forecasting more than expected tax revenue over the same period, finance minister Lars Klingbeil said on Thursday.
Chancellor Friedrich Merz's government backed a 500 billion euro ($582 billion) spending plan in March to drive growth in an economy hit by the pandemic and Russia's invasion of Ukraine - but that also raised questions over how it would be funded.
It is expecting to bring in 33.6 billion euros ($39.18 billion) more in tax revenues in the 2025-2029 period than previously forecast, after the tax council revised its projections for total tax revenues higher by 0.7% to 5.17 trillion euros for the period.
The more optimistic tax estimate will narrow the budget hole for 2027 by 7 to 8 billion euros, which was estimated at around 30 billion euros before.
However, the budget for 2028 still faces a shortfall of around 60 billion euros and the 2029 budget a shortfall of more than 60 billion euros, the state secretary in charge of the budget said at a press conference.
"With an eye to the budget gaps from 2027 onward, we will continue to pursue a strict course of consolidation: all ministries will remain required to make cuts," Klingbeil told the same briefing.
The minister pledged that the party leaders of the governing coalition will present a package around the turn of the year with their plans to close the existing gap in the financial planning until 2029.
Klingbeil said the rising tax revenue reflected a more positive economic outlook.
In May, its estimates were cut by 81.2 billion euros due to an economic downturn and tax relief measures.
Europe's largest economy contracted for a second consecutive year in 2024, becoming the only G7 member that failed to grow for the last two years.
However, the government, which expects only 0.2% growth this year, has predicted the economy will rebound with growth of 1.3% next year and 1.4% in 2027, supported by state spending.
($1 = 0.8575 euros)
(Reporting by Maria Martinez, Christian Kraemer, Holger Hansen and Klaus Lauer; Editing by Kirsti Knolle, Muvija M and Alison Williams)
The article discusses Germany's budget gap despite improved tax revenue forecasts and the need for ministry cuts.
Ministries are required to make cuts, and a financial package will be presented by the government.
Germany's economy is expected to rebound with growth of 1.3% next year and 1.4% in 2027.
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