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Berlin, Germany – In a bid to support its struggling economy, the German government has drafted a budget plan that would significantly increase borrowing to over €203 billion ($232 billion) in 2027. The drastic measure is part of the country’s efforts to address years of underinvestment and mitigate the effects of war-related energy shocks.
According to a draft budget seen by Reuters, the total spending for 2027 is set to reach €555.4 billion, which represents a notable increase from previous years. The draft emphasizes investment spending, with a projected allocation of €117.5 billion. This investment is backed by a €500 billion infrastructure fund established to stimulate economic growth.
The German government is also prioritizing defense spending, with a significant increase of €27 billion from 2026 to 2027, bringing core defense spending to €109 billion. When factoring in additional funding for security programs and Ukraine, the total defense expenditure is expected to reach around €130.1 billion. This exemption from debt limits under the new fiscal rules is aimed at ensuring flexibility in addressing Germany’s security needs.
The budget draft also includes a cautionary note regarding the potential disruption in oil production in the region and the Strait of Hormuz. If the situation persists beyond the summer, it could have far-reaching consequences for the German economy. The draft is expected to be approved by the cabinet on Monday before being presented to parliament for review.
The increased borrowing and spending plans are part of Berlin’s efforts to revive its economy, which has faced numerous challenges, including energy shocks resulting from the ongoing conflict in Ukraine. The move is expected to provide much-needed stimulus and ensure the country’s ability to address pressing issues, from defense and energy to infrastructure development. The draft budget remains a subject of scrutiny, with parliamentarians set to carefully assess the proposal in the coming months.