The German government has approved a draft budget with a high level of borrowing

On June 24, the German government approved the draft federal budget for 2025, along with key budget indicators for 2026 and a financial plan until 2029. This is stated in a government press release.

As noted, the draft budget for the current year is aimed at addressing three main issues: security, weak economic growth, and the urgent need for modernization.

The defense budget is expected to more than double by 2029, reaching €152.8 billion. This means that defense spending should reach 3.5% of GDP by that date.

According to the draft, public debt will also increase significantly, to €81.8 billion in 2025, compared to €33.3 billion last year. It will continue to grow over the next four years.

Federal investments are named as a key area of the 2025 budget. They will be significantly increased with the help of a new special fund for infrastructure and climate neutrality. This year, its volume will exceed €115 billion, which is approximately €40 billion more than last year.

More than €100 billion will be invested in the country’s railway infrastructure during the financial planning period until 2029, with this year’s amount reaching almost €22 billion.

Over the next 12 years, €500 billion will be allocated through the infrastructure fund, of which €100 billion will go towards the “green” transformation.

According to Euractiv, the government has invested significant political capital in its “growth stimulus” — a package of tax breaks for companies and subsidies for private investment. However, this will reduce tax revenues, and the government will have to reach an agreement with regional, state, and municipal authorities to cover the expected losses.

In addition, the government will subsidize energy for consumers and companies.

It is noted that the draft federal budget for 2025 is currently undergoing parliamentary procedure. The first debates in the Bundestag are scheduled for early July, with final approval of the budget expected in September.

This year’s budget was delayed due to the national elections in February.

As GMK Center reported earlier, in early June, the German government approved a package of tax breaks totaling €46 billion — the first in a series of expected measures — to support business and the economy for the period from 2025 to 2029. The goal is to strengthen the country’s competitiveness and stimulate investment. The package includes preferential depreciation rules, a gradual reduction in the corporate tax rate, and increased research subsidies.