Germany’s parliament has approved the 2025 federal budget, unlocking record investments of nearly €116 billion (US$137 billion) while raising defence expenditure to 2.4% of GDP.
The budget, passed on Thursday, is the first since reforms to loosen fiscal rules earlier this year. It draws on a €500 billion infrastructure fund and exemptions from debt rules for defence spending, described by Finance Minister Lars Klingbeil as a “paradigm shift” in fiscal policy.
The plan boosts total spending to €591 billion, including allocations from the infrastructure fund and a €100 billion defence fund established after Russia’s invasion of Ukraine. Borrowing in 2025 is set at €143.2 billion, comprising €81.8 billion from the core budget, €37.2 billion from infrastructure funds and €24.1 billion from defence.
Germany aims to revive its slowing economy through public investment while strengthening defence commitments under NATO. The defence allocation, though higher, still falls short of NATO’s new 3.5% of GDP target agreed in June, under pressure from the US.
Chancellor Friedrich Merz’s coalition now faces tough negotiations over future budgets, particularly a projected €30 billion gap in 2027. Parliament will begin debating the draft 2026 budget next week, with final approval expected in November.
Reuters
