On July 6, the German federal government approved the draft federal budget for 2027 and the financial plan through 2030. Despite record spending and debt under the new Special Fund (SVIK) and the budgetary exemption for the Bundeswehr, the challenges remain significant. Fiscal leeway is shrinking, budget shortfalls in the billions persist, and pressure for tangible structural reforms is mounting.

The German federal government must pass two federal budgets this year. Despite the increased borrowing capacity provided by the new special fund and the budgetary exemption for the Bundeswehr, this presents various challenges—ranging from persistent budget shortfalls in the billions, rising interest rates, and criticism of the postponement of investments, to intense pressure for fiscal consolidation and reform.

Zum Bundeshaushalt 2026 äußert sich Hauptgeschäftsführerin Tanja Gönner: „Die Bundesregierung setzt mit einem Investitionshaushalt für das Jahr 2026 ein richtiges Signal, doch das reicht bei Weitem nicht aus.“

Tanja Gönner, BDI-Hauptgeschäftsführerin, zur Einigung von Union und SPD auf ein Finanzpaket für Infrastruktur und Verteidigung: „Das ist ein wichtiges Signal. Ernst der Lage ist erkannt.“

In mid-July 2024, the Federal Cabinet approved a draft of the 2025 federal budget. After first having to close a funding gap of five billion euros, the federal government submitted the final draft to the Bundestag in mid-August 2024. Parliament and the Budget Committee are currently deliberating on the matter. Despite the adjustments, a funding shortfall of approximately twelve billion euros remains.

The Federal Constitutional Court (BVerfG) blocked a controversial budget maneuver by the traffic-light coalition in mid-November 2023 and declared the transfer of 60 billion euros from unused COVID-19 loans to the Climate and Transformation Fund (KTF) to be unconstitutional. The federal government must now ensure sustainable financing for the necessary ramp-up of public and transformation investments.

Germany is falling further and further behind when it comes to corporate investment and location decisions, even though tax revenues are growing and the tax-to-GDP ratio is at its highest level since reunification. The BDI is calling on policymakers to take countermeasures—by restructuring federal-state finances, consistently prioritizing spending, and providing appropriate tax incentives for investment.

Germany is increasingly losing ground when it comes to corporate investment and location decisions. The tax environment is already no longer competitive. It is time to consistently prioritize public spending and, at the same time, abolish the solidarity surcharge once and for all.

The federal government and the states must once again assume financial responsibility for their respective constitutional duties. Clear priorities must be set regarding the fulfillment of these duties by the federal government and the states, and federal-state financial arrangements must be reorganized. There is also a need for stable, crisis-resistant, and modern financing for local governments.

The fiscal consolidation of the federal budget is an essential step toward regaining compliance with the debt brake. Within this framework, however, policymakers must provide strong impetus for public and private investment. Sound fiscal policy is, not least, a matter of intergenerational equity.