Germany’s federal cabinet approved its 2027 fiscal year draft budget on July 6, totaling approximately 555.4 billion euros in planned spending [1, 2, 3, 4, 5]. Defense spending will increase sharply to about 109.7 billion euros, up nearly one-third from the 82.7-82.2 billion euros allocated in 2026 [1, 2, 3, 4, 5]. Including military support for Ukraine and additional security measures, total defense-related expenditure is expected to reach around 130.1 billion euros [1].

The draft also establishes special multi-year funds financed by new debt to support infrastructure renovation and carbon neutrality efforts, with 500 billion euros earmarked for these projects. A separate fund will finance defense spending [2, 3, 5]. Germany aims to raise defense spending gradually to 3.5% of GDP by 2029 and reach NATO’s 5% GDP target by 2035 [2, 3, 5].

Finance Minister Christian Lindner highlighted the necessity of new borrowing, stating, “We cannot defend ourselves against Putin with a ‘black zero’ [a balanced budget].” He added, “Without new debt, it’s like a rocket that cannot fly to the moon.” Lindner described Russia’s actions as “imperialist madness posing an unprecedented threat to European peace,” and noted Germany’s debt level remains well below the eurozone average, which the country can sustain [2, 3].

The draft budget plans new government borrowing of about 119 billion euros in the core budget, rising to roughly 203 billion euros including the special funds [2, 3, 4, 5]. To raise revenue, the government proposes tax increases on alcohol, tobacco, sugar, plastics, and the wealthy [2, 3, 5]. At the same time, cuts are planned to social welfare, pensions, social security, and federal departments excluding defense [1, 2, 3, 5]. The development aid budget will shrink by 5 billion euros to 9.5 billion euros in 2027 [2, 3, 5].

Germany is facing economic challenges characterized by slow growth. The Finance Minister attributed some budget reductions to geopolitical tensions dampening the economic outlook [2, 3, 5].

The German parliament will begin debating the 2027 budget in September 2026, with approval expected by November or the end of that year [1, 2, 3, 5].