German cabinet approves 2027 draft budget with EUR 110.8 bn core borrowing and EUR 105.8 bn defence allocation, citing Iran war
The German cabinet on April 29, 2026 approved the 2027 budget framework presented by Finance Minister Lars Klingbeil (SPD), with core spending of EUR 543.3 billion and net new core-budget borrowing of EUR 110.8 billion; counting credit-financed special funds for defence and infrastructure raises planned new borrowing to EUR 196.5 billion. Defence rises from EUR 100.9 billion in 2025 to EUR 105.8 billion in 2027, reaching EUR 179.9 billion -- 3.1 percent of GDP -- by 2030. The Labour Ministry budget exceeds EUR 200 billion for the first time at EUR 201.2 billion. Funding gaps remain: roughly EUR 29 billion in 2028 and EUR 78.7 billion of debt-service costs in 2030, more than one in eight federal euros. Around EUR 4 billion per year in structural savings is planned alongside new sugar, plastic, alcohol and tobacco taxes. Chancellor Friedrich Merz (CDU) defended the higher defence spending by citing the Iran war; 150 development NGOs warned against a roughly EUR 600 million BMZ cut, while the Linke and other opposition voices argued cuts fall on the public except in defence. The ifo Employment Barometer for service providers fell to its lowest reading since May 2020, attributed in part to the prolonged Strait of Hormuz blockade.
Finance Minister Lars Klingbeil (SPD) presented the 2027 budget on April 29, 2026, and the cabinet endorsed it the same day. Core spending is set at EUR 543.3 billion with net new borrowing of EUR 110.8 billion in the core budget, growing to EUR 152.7 billion by 2030; including credit-financed special funds for defence and infrastructure, total planned borrowing in 2027 reaches EUR 196.5 billion. The regular debt-brake credit ceiling will be fully utilised in every year of the plan.
Defence is the budget's most rapid-growth line. The defence ministry budget rises from EUR 100.9 billion in 2025 to EUR 105.8 billion in 2027, then to EUR 179.9 billion by 2030 -- 3.1 percent of GDP. The labour ministry retains the largest single budget, exceeding EUR 200 billion for the first time at EUR 201.2 billion in 2027 and rising to EUR 233.5 billion by 2030. Even with that growth, the medium-term plan shows roughly EUR 29 billion in financing gaps for 2028, while debt service in 2030 reaches EUR 78.7 billion -- more than one in eight federal euros.
Structural savings of about EUR 4 billion per year are planned across all ministries, alongside new taxes and rate increases: a sugar levy on soft drinks, a plastic levy, and higher alcohol and tobacco duties. Chancellor Friedrich Merz (CDU) defended the rising military spending, telling reporters that "developments in the past year and recent months in Iran have shown how important the investments in our defence capability are". Merz also signalled the 2027 framework comes with healthcare insurance reform still in active discussion. A Kazakh man was arrested in Berlin during the same week on suspicion of spying for Russia.
Opposition and civil-society pushback was immediate. Linke parliamentary leader Soeren Pellmann told AFP that "in all areas other than rearmament, savings and cuts are being made at the expense of the public". A joint appeal by 150 development and humanitarian organisations including Welthungerhilfe and Oxfam warned that the planned roughly EUR 600 million reduction in the BMZ (development cooperation) budget would "endanger lives". The day's broader economic context tightened the budget's risk profile: the ifo Employment Barometer fell to its lowest reading since May 2020 for service providers, with ifo head of surveys Klaus Wohlrabe tying the decline to "geopolitical uncertainty" -- specifically the still-unresolved blockade of the Strait of Hormuz -- "spilling over into companies' personnel planning".
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