Germany's 2027 budget: A record €561 billion and a mountain of debt
After 16 hours of negotiations, Germany's Bundestag Budget Committee has approved a €561 billion draft budget for 2027, requiring €123 billion in new borrowing to cover the shortfall.
The German Bundestag's Budget Committee approved the 2027 draft budget early Friday morning following nearly 16 hours of negotiations. Lawmakers from the conservative CDU/CSU coalition and their SPD partners voted in favor, while opposition parties including the Greens, Left Party, and AfD voted against. The final Bundestag vote is scheduled for November 27.
The budget totals €561 billion ($620 billion), but with a €123 billion shortfall, significant borrowing will be required. When combined with existing debt for defense and infrastructure, total borrowing for 2027 exceeds €210 billion, the second-highest level in German history, trailing only the €215.4 billion borrowed during the COVID-19 pandemic in 2021.
Mounting debt criticism
The budget has drawn sharp criticism from opposition parties. Green Party lawmaker Sebastian Schäfer and Left Party colleague Dietmar Bartsch condemned it as a "gigantic mountain of debt," calling it "untrustworthy" and "irresponsible" at the expense of future generations.
The growing debt stems from multiple crises driving up costs. Russia's war against Ukraine continues to boost defense spending, while the aging population increases social expenditures. Additionally, crumbling infrastructure requires modernization, and the energy transition demands billions in investment.
Defense and social spending
More than half of the new debt is allocated to security and defense. Germany's support for Ukraine has reached approximately €100 billion since the conflict began, and the defense budget is set to grow to nearly €110 billion in 2027, an increase of €27 billion from the previous year.
The largest single budget item comes from the Ministry of Labor and Social Affairs, exceeding €200 billion. Rising pension costs are a major factor, as people born in the 1960s retire while birth rates have declined since the early 1970s. This demographic shift means fewer workers supporting more retirees, forcing pension contributions to rise to nearly 20% of gross salary.
The federal government will continue to provide Ukraine with political, financial, humanitarian, civil and military support for as long as necessary.
Fiscal future concerns
Germany's debt-to-GDP ratio stood at 63.5% at the end of 2025, relatively low compared to France (over 110%) and Italy (135-140%). However, the German Council of Economic Experts warns that if debt continues rising at the current rate, the ratio could reach 100% by 2040, potentially endangering Germany's triple-A credit rating.
As the only G7 nation still holding a triple-A rating, Germany benefits from lower interest rates on new loans. Nevertheless, interest payments are placing an increasing burden on the federal budget, with approximately €42 billion expected in 2027.
Chancellor Friedrich Merz has vowed to push ahead with reforms, including a potential reduction in the electricity tax to the European minimum. "I remain committed to my goal of lowering the electricity tax to the European minimum — in full — starting next year," Merz stated during a visit to Dublin.
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