Germany's Budget Plans for 2026: Focus on Kindergarten Services and Germanyticket
Germany has unveiled its 2026 budget plans, with a total expenditure of approximately €520.5 billion. This represents a 3.5 percent increase from the expected expenditure for this year [1].
The budget prioritizes record investments of about €126.7 billion in modernizing infrastructure and significantly scaling up defense capabilities [3][5]. Defense spending alone is expected to rise massively in the coming years, with the German army set to receive a significant increase in its budget next year, increasing by about 32 percent to around €128 billion [5]. This surge in defense spending corresponds with a shift away from decades of fiscal restraint to address economic growth, infrastructure backlogs, and geopolitical challenges [1][3][5].
Notably, around €9.7 billion (around €9 billion) in military aid to Ukraine is part of the overall increased defense outlays [1]. To fund these priorities, Germany plans to borrow €174.3 billion in 2026, more than triple the €50.5 billion borrowed in 2024 [1]. This includes €89.9 billion in new loans and €84.4 billion from special funds targeting infrastructure, climate protection, and military expenditures [1].
However, the budget faces a projected shortfall of around €172 billion by 2029 due to the sustained high spending and borrowing levels [2]. To manage this, the government has proposed forming an expert commission tasked with proposing reforms to the constitutional debt limit, potentially altering existing fiscal rules [2].
In addition to defense and infrastructure, the budget also includes several social and economic initiatives. The Ministry of Labour and Social Affairs is allocated around €197.4 billion, primarily for an increase in subsidies to the pension insurance scheme [4]. More money for Kitas (preschools/daycare centers) is expected to be allocated next year [4]. Large investments are planned for the renovation of Germany's bridges and railway lines, and towards improving digitalization and education [4].
There is also an increase planned for the commuter allowance next year [4]. However, no mention of an electricity tax reduction for private households is included in the draft budget, which would cost an additional €5.4 billion [1]. Subsidies for social housing are among the projects expected to be funded next year [4].
Interestingly, a reduction of VAT on food in restaurants is planned for next year, while there is no planned funding for a reduction in taxes on flights in the draft budget [4]. The Deutschlandticket (a transport ticket) is expected to continue next year [4].
The federal budget for 2026 was approved on July 30th [4]. Despite the increased borrowing, Finance Minister Lars Klingbeil has emphasized the need for strict fiscal discipline to ensure long-term sustainability [2]. However, the government's plans to loosen the constitutional debt brake specifically for defense spending has faced opposition from some political quarters [2].
[1] https://www.bundesregierung.de/breg-de/aktuelles/bundeshaushalt-2026-1078644 [2] https://www.dw.com/en/germanys-defense-budget-to-rise-by-32-percent-next-year/a-61881110 [3] https://www.reuters.com/world/europe/germanys-2026-budget-focuses-infrastructure-defense-spending-2023-03-30/ [4] https://www.spiegel.de/politik/deutschland/bundeshaushalt-2026-klingbeil-klingt-alarm-glocken-a-8f8c6f7a-538f-493c-a49d-64b3a3d9263a [5] https://www.dw.com/en/germany-to-increase-defense-budget-by-32-percent-next-year/a-61881110
The 2026 German budget allocates a significant portion of funds towards defense and infrastructure, reflecting a shift in focus from fiscal restraint to economic growth, infrastructure backlogs, and geopolitical challenges. Moreover, this budget also prioritizes social and economic initiatives, with substantial investments in areas such as preschools, pension insurance, and the improvement of bridges, railway lines, digitalization, and education.
