Germany is charting a bold new course with its 2026 draft budget, unveiling record investment and borrowing to revitalize infrastructure, strengthen defence, and stimulate long-term growth.
Record Investment for Modernization
The German government’s 2026 draft budget outlines €126.7 billion in investment — the highest in the country’s history. This marks a significant rise from €74.5 billion in 2024 and €115.7 billion in 2025, underscoring Berlin’s determination to modernize its infrastructure and strengthen economic foundations.
The draft budget, which totals €520.5 billion, is paired with a medium-term financial framework through 2029. Cabinet approval is expected this week, with parliamentary discussions beginning in September.
Borrowing to Fuel Growth
Germany plans €174.3 billion in borrowing in 2026, more than triple 2024 levels, to finance its ambitious agenda. This surge is enabled by two special funds:
- A €500 billion infrastructure fund, exempt from Germany’s strict “debt brake,” will add €58.9 billion in borrowing in 2026.
- The €100 billion defence fund, established after Russia’s invasion of Ukraine, will contribute another €25.5 billion in 2026.
In the core budget, borrowing will rise to €89.9 billion, reflecting the government’s commitment to driving recovery and growth.
Defence Spending to Strengthen Security
Germany’s defence allocation will climb from €95.1 billion in 2025 to €161.8 billion by 2029, ensuring robust national and NATO commitments. By 2029, defence spending will represent 3.5% of GDP, well above NATO’s 2% target.
With reforms allowing up to €380 billion in borrowing for defence between 2025 and 2029, Germany is positioning itself as a stronger security partner while modernizing its military.
Turning the Page on Stagnation
After two years of stalled growth, Germany’s government expects these investments to improve the economic environment in 2025 and 2026, signaling a turnaround for Europe’s largest economy.
The budget reflects a decisive shift away from decades of fiscal conservatism, embracing strategic spending to rebuild infrastructure, foster innovation, and reinforce resilience.
