Finances: High debts, lots of money for the military: cabinet approves budget

Lars Klingbeil has brought his first draft budget through the cabinet as long as long as long. His plans mark a U-turn according to the FDP-shaped financial policy of the traffic light coalition. With new loans and special funds, the Federal Government wants to invest in defense, modernize infrastructure and bring Germany’s economy to growth. Schwarz-Rot understood “that something has to be different in the country,” said the SPD boss. The standstill and the long phase of uncertainty would have to be ended.

The cabinet not only decided to draft the budget for 2025, but also corner values ​​for 2026, the rough financial planning by 2029 and a law with which a special fund for infrastructure and climate protection is to be created. Now the Bundestag and Federal Council are dealing with the plans.

The 2025 budget provides for that

Because the traffic light government had not got the budget for this year, the ministries have had to limit itself to the most important thing since the beginning of the year. Therefore, the budget decision is urged: Before the summer break, Klingbeils should advise plans for the first time in the Bundestag and then finally decided in mid -September.

The finance minister is planning expenses of 503 billion euros. 81.8 billion euros are to be financed in the core budget from credit – more than twice as much as last year. In addition, there are more than 60 billion euros from debt -financed special pots.

75 billion euros are planned for the Bundeswehr, population protection, intelligence services and help for states such as Ukraine contrary to international law – 32 billion of them. Overall, according to the Ministry of Finance, the federal budget clearly fulfills the two percent rate of NATO for defense spending. Klingbeil’s house comes to 2.4 percent.

Around 22 billion euros are also invested in the rail infrastructure – in the renovation of rails and in digitization. The money comes from the normal household, partly from the planned infrastructure special pot. Four billion is planned for social housing and urban development.

For 2026, the Vice Chancellor first presented only a rough planning, the exact draft budget is to be decided on July 30 by the cabinet.

So far, Klingbeil is planning with expenses of 519.5 billion euros. There are loans of 89.3 billion euros in the core budget, plus 83.4 billion from debt -financed special funds for the Bundeswehr and infrastructure.

The expenditure for the Bundeswehr, population protection, intelligence services and help for states that are contrary to international law such as Ukraine are to increase to 97 billion euros. At the NATO quota, Germany would come to around 2.8 percent next year by the Ministry of Finance.

By 2029, Klingbeil is aiming for defense spending of 3.5 percent of gross domestic product. Germany must be “deterrent and defense”, said the SPD leader.

Special funds infrastructure

In order to enable the planned billion dollar investments in bridges, streets, energy networks and other infrastructure, a special pot is to be set up, which runs away from the debt brake and is filled with loans over 500 billion euros. The pot is said to have a term of 12 years and expire at the end of 2036. 100 of the 500 billion euros are firmly planned for climate protection, another around 100 billion for infrastructure investments by the federal states.

Unlike the federal states, the federal government should only be able to finance additional projects with the money that go beyond the normal federal budget. The Greens already criticize that money is not used for progress, climate protection, social justice or the modernization of the country. “The coalition is far too little about the future, but above all about concealing political conflicts of the coalition,” said HausHäler Sebastian Schäfer from the German Press Agency.

Bushing for the economy

The renovation of the infrastructure is intended to help boost the weak economy. In addition, the federal government wants to provide companies with better tax depreciation options. On the night of Tuesday, the federal and state governments agreed on a financing of the program: expected tax losses by the municipalities take over the federal government completely, which of the federal states.

In addition, energy prices should decrease from January 2026 – for companies and consumers. “We want to get into a first effective reduction in electricity prices for industry, trade and private households,” said the SPD boss. Consumers would be relieved of the costs of the gas storage levy, the reduction in electricity tax for industry, agriculture and forestry are “stabilized”, and the federal government takes on a significantly stronger share of the costs of the network expansion.

High debt – no problem?

In the core budget and with the special pots running next to the budget, the federal government wants to collect almost 850 billion euros in debt by 2029. Klingbeil defends this: It is important to take money in hand so that the economy is growing. “I think nothing is more expensive than standstill in recent years,” said the SPD leader.

For him, the black zero is “no value in itself” if bridges and schools were rotten and the Bundeswehr was neglected. “Unlike for some predecessors, this is no particular value for me if I can keep the money and cannot spend it and if I realize that nothing is going on in the country,” said Klingbeil obviously with a view to former finance minister and FDP boss Christian Lindner.

However, the loans also ensure an enormous interest burden: According to the Ministry of Finance, interest rates total almost 215 billion euros by 2029. For this reason, there are still billions of gaps in Klingbeil’s calculation for the years from 2027. In addition, the federal government must then begin to repay the debts recorded during the Corona crisis – and shrink the financial scope of the debt brake, the economy should grow again.

Greens, Left and BSW have significant criticism of the budget plans. “Germany’s top priority is an unprecedented upgrade with Klingbeil’s debt plans,” said the left-wing housekeeper Dietmar Bartsch from the German Press Agency. It is not about security, instead rule excessiveness. BSW boss Sahra Wagenknecht criticized: “100 billion euros more for weapons and tanks, a tripling of arms expenditure within four years, that’s just sick.”

The Greens threw Klingbeil and Chancellor Friedrich Merz (CDU) to break agreements. You have promised that every euro from the guilty pot is going into new investments for the infrastructure, said Greens boss Franziska Brantner on Deutschlandfunk. “And after the first information we have, we see clearly: Word is broken here.” That is “a lot of household tricks instead of future investment”. Green Group leader Katharina Dröge criticized in the ZDF “Morgenmagazin” that fossil gas subsidies were sometimes financed from the agents intended for climate protection.