Image reproduced from 中時新聞網

On Tuesday (June 24), the German Cabinet approved the draft budget for 2025, paving the way for a significant increase in government spending. In March of this year, the German Parliament approved a modification of the Basic Law, relaxing Germany's "debt brake" policy, which allowed for an increase in government borrowing for national defense and infrastructure spending.

The budget includes a financial plan that sets up a €500 billion infrastructure fund. According to the plan proposed by Finance Minister Lars Klingbeil, the German government will substantially increase new debt to repair aging infrastructure while also implementing a stimulus package to combat the sluggish economy, and funding record defense expenditure.

According to the draft budget, Germany’s defense budget is expected to more than double by 2029 to €152.8 billion, meaning that defense spending will account for 3.5% of Germany's GDP. U.S. President Donald Trump has been pressuring European nations to increase their defense spending as a percentage of GDP.

Last Sunday, NATO member states reached a general consensus agreeing to increase military expenditure to 5% of GDP by 2035. Additionally, given Russia's full-scale invasion of Ukraine in February 2022, security concerns in Germany have intensified, prompting calls for increased investments in defense.

The budget draft also indicates a significant increase in the German government's net borrowing. In 2025, net borrowing is expected to jump from last year's €33.3 billion to €81.8 billion. Over the next four years, this figure is predicted to continue to rise, reaching €89.3 billion by 2026, €87.5 billion by 2027, €115.7 billion by 2028, and €126.1 billion by 2029.

Why is the decision on the 2025 budget being made now? Since the beginning of this year, the German government has been operating under a temporary budget. This year's budget was postponed due to the German elections in February. The 2025 German elections were originally scheduled for September, but the collapse of former Chancellor Olaf Scholz's "traffic light" coalition government (composed of the Social Democrats, Greens, and the Free Democrats) caused the elections to be advanced. The trigger for the previous government's collapse was the disagreement over budget expenditures between the center-left Social Democrats and the fiscally conservative Free Democrats.

After approval by the Cabinet, the 2025 budget has now been submitted to the Bundestag. This move aims to give members of parliament time to discuss the bill before the summer recess in order to achieve final approval by September. The draft budget for 2026 is expected to be fully discussed by the German Cabinet by the end of July and submitted to the Bundestag for a vote by the end of this year.

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