Overview

• Germany’s governing coalition secured Bundestag approval in principle for an €850 billion borrowing package to fund defense and infrastructure through 2029.
• IfW Kiel projects Germany’s debt ratio rising from 62.5 % today to between 75 % and 81 % by the end of the decade and potentially up to 118 % by 2040 without reforms.
• Rising interest costs and a breach of the EU’s 60 % debt-to-GDP threshold raise concerns over credit-rating downgrades and long-term fiscal sustainability.
• KfW warns that under President Trump’s proposed tax cuts, U.S. debt could climb from about 120 % to more than 170 % of GDP within ten years, risking investor confidence.
• Economists stress the need for countermeasures such as spending cuts, revenue increases or structural reforms to prevent a self-reinforcing debt spiral in both economies.