Overview

• Merz’s cabinet tapped new borrowing powers and drafted a budget anticipating a €172 billion gap from 2027 to 2029 to fund major military expansion and infrastructure projects
• Finance Minister Lars Klingbeil warned that a separate €30 billion hole in the 2027 budget will require strict consolidation and reassessment of subsidies
• In March the Bundestag amended the constitution to relax the debt brake and established a €585 billion infrastructure fund for long-term investment
• Economists including Clemens Fuest caution that rising interest payments and defense outlays risk crowding out other public services and rendering the four-year projection unrealistic
• Germany’s pivot from balanced-budget rules tests its role as the Eurozone’s fiscal anchor and could unsettle broader EU budgetary norms