Germany has passed a draft budget for 2025, planning to borrow over 800 billion euros over five years to promote investment

The German Federal Cabinet passed the draft federal budget for 2025 and the fiscal framework for 2026 on Tuesday (June 24), proposing to significantly increase public investment in the next two years to revitalize the economy that has been stagnant for two consecutive years.

Reuters reported that according to the draft budget, the total federal investment will reach 115.7 billion euros in 2025 and rise to 123.6 billion euros in 2026, much higher than 74.5 billion euros in 2024.

Lars Klingbeil, the Vice Chancellor and Finance Minister of Germany, said that by 2029, the annual investment of the federal government will increase to nearly 120 billion euros.

This expansion plan includes a medium-term fiscal plan up to 2029, indicating that Germany intends to increase defense spending to 3.5% of its gross domestic product (GDP) and support it through a borrowing plan of nearly 400 billion euros. Specifically, defense spending will increase from 95 billion euros in 2025 to 162 billion euros in 2029.

To support the above-mentioned expansion, Germany will draw on a 500 billion euro infrastructure fund approved in March this year and apply debt rule exemptions for defense spending.

According to the budget and medium-term plan, from 2025 to 2029, Germany will borrow 500 billion euros under the regular budget framework and an additional 270 billion euros from the infrastructure fund. If the debt in the defense fund set up by the previous government to deal with the 2022 Russia-Ukraine war is included, the total borrowing over a five-year period will rise to 847 billion euros.