The German federal government faces a daunting financing gap exceeding 170 billion euros by 2029. The draft budget for 2026 reveals a projected new debt of 174.3 billion euros, split between the core budget and special budgets. This financial strain is largely attributed to escalating investments and increased defense spending, particularly with NATO commitments rising to 2.8 percent. As the Bundestag prepares to debate this budget in September, concerns about fiscal responsibility are mounting.
Economist Ulrike Malmendier has criticized the government's budgetary priorities, arguing that the focus on military funding overshadows essential investments in social and environmental sectors. The estimated financing gap of 172.1 billion euros for 2027-2029 is notably higher than earlier forecasts, prompting calls for a comprehensive reform of the debt brake.
Germany's rising debt levels are alarming, with the average per capita debt now at 30,062 euros, a significant increase from the previous year. Reiner Holznagel, president of the Taxpayers' Association, has expressed grave concerns about the implications of unsound fiscal policies on Germany's creditworthiness. He has condemned the government's budget plan for lacking structural reforms and cautions that increasing interest payments may hinder future investments.
The Taxpayers' Association accuses the government of engaging in 'creative accounting' by reallocating funds from special assets rather than pursuing genuine new investments. This practice, they warn, could jeopardize the nation's financial stability and lead to higher borrowing costs, further complicating an already precarious fiscal landscape.
