Germany Breaks Fiscal Mould with Record 2026 Budget

In a significant shift from its traditional fiscal policies, the German cabinet has approved a 2026 draft budget featuring record investments and borrowing. The move, announced on Wednesday, aims to rejuvenate Europe's largest economy. Germany's considerable investments of 126.7 billion euros and a borrowing allowance of 174.3 billion euros mark a stark departure from decades of fiscal conservatism.

With total spending pegged at 520.5 billion euros, this new budget forms part of a medium-term financial framework extending to 2029. The projected spending signifies a 10% increase over 2025 figures, with a staggering 55% jump compared to 2024. This fiscal strategy seeks to modernize Germany's aging infrastructure and elevate its defense capabilities.

A substantial 500 billion euro infrastructure fund and a crucial debt rule exemption for defense spending underpin this budgetary expansion. As borrowing in 2026 will exceed 2024 levels by more than threefold, the German parliament is set to commence budget discussions by late September, aiming for final approval by the end of the year. ($1 = 0.8654 euros)

(With inputs from agencies.)