Germany plans to borrow more than €838 billion between 2027 and 2030 to finance a sweeping programme of defence spending and infrastructure investment, marking one of the biggest departures from the country’s traditional fiscal orthodoxy since reunification.
The borrowing plans were approved by Chancellor Friedrich Merz’s cabinet on July 6 as part of the federal government’s draft 2027 budget and medium-term financial framework, Reuters reported.
Ministers argue the spending surge is needed to revive Europe’s largest economy after years of weak growth, modernise ageing infrastructure and rapidly strengthen Germany’s armed forces amid growing security concerns in Europe.
Under the plans, Berlin will borrow €203.6 billion in 2027 alone, including €118.7 billion through the federal budget, €54.9 billion from Germany’s €500 billion infrastructure fund and €30 billion from a dedicated defence fund.
Total government spending next year will reach €555.4 billion, while investment will increase to €117.5 billion, almost 50 per cent higher than under the previous government.
The programme follows constitutional reforms adopted earlier this year that significantly loosened Germany’s long-standing “debt brake”. The changes exempt much defence spending from borrowing limits and established a €500 billion special fund for infrastructure, ending decades of strict fiscal restraint that had become a hallmark of German economic policy.
A large share of the additional borrowing will finance Germany’s military expansion. Core defence spending is set to increase from €82.2 billion in 2026 to €109 billion in 2027, while total defence and security expenditure—including military aid for Ukraine—will reach €130.1 billion next year.
By 2030, annual defence spending is expected to rise to almost €184 billion, putting Germany on track to meet NATO’s target of spending 3.5 per cent of GDP on defence.
Over the five-year period from 2026 to 2030, Berlin expects to devote almost €784 billion to defence-related activities, reflecting what the government describes as a fundamental shift in Germany’s security posture following Russia’s invasion of Ukraine and growing uncertainty over long-term US security commitments to Europe.
Finance Minister Lars Klingbeil defended the borrowing programme, saying the government was investing in Germany’s “future viability, innovative strength, security and resilience” while seeking to return the economy to sustained growth.
The scale of the borrowing nevertheless represents a remarkable reversal for Chancellor Merz, whose Christian Democrats had long championed fiscal discipline. According to the Financial Times, the spending package constitutes Germany’s largest peacetime borrowing programme and reflects a political consensus that years of underinvestment and a deteriorating European security environment require a more activist fiscal policy.
Not everyone is convinced. Germany’s Federation of German Industries (BDI) warned that interest payments on the national debt are expected to almost double, from €41.9 billion in 2027 to €80.7 billion by 2030, meaning nearly one euro in every five of future tax revenues could eventually be used simply to service debt.
Business groups have also questioned whether such borrowing levels are sustainable over the longer term.
The budget spokesman of the AfD parliamentary group, Michael Espendiller, said in a reaction: “This draft budget is a slap in the face for all hard-working Germans, who are being robbed by this government like a Christmas goose. In the process, the state itself is getting fatter and fatter, and neither Klingbeil nor Merz are even remotely thinking about finally limiting the horrendous state spending.”
He noted a slew of new taxes and burdens while at the same time the federal government is reducing federal subsidies for statutory pension and health insurance.
The Greens warned that the government pulled billions from the pot for climate protection to plug its budget gaps.
They also noted that pensions and health were targeted.
Despite the record borrowing, Berlin’s finances remain under pressure.
While the government has closed a projected €34 billion financing gap in the 2027 budget, officials estimate a further shortfall of around €109 billion between 2028 and 2030, suggesting additional spending cuts or revenue measures may still be required in coming years.
The draft budget will now be debated in the Bundestag after the summer recess before lawmakers vote on its final adoption later this year.
