Germany’s federal cabinet has approved a draft 2027 budget with €118.7 billion in core net new borrowing, a 7% jump from earlier planning figures.
The total borrowing package actually exceeds €203 billion when you factor in €54.9 billion from a dedicated infrastructure fund and €30 billion earmarked for defense. Total federal spending for 2027 is projected at roughly €555.4 billion.
How Germany got here
To understand why this matters, you need to rewind to March 2025. That’s when Germany passed constitutional changes that fundamentally rewired its approach to government debt. The reforms created a €500 billion infrastructure fund and enabled essentially unlimited debt financing for defense spending.
Before those reforms, Germany operated under its famous “debt brake,” a constitutional provision that capped structural federal deficits at 0.35% of GDP. The rule was in place since 2009 and strictly enforced from 2015 onward.
