Germany's Bundestag is in the final stages of passing the 2025 federal budget, which is notable for its short three-month duration and high levels of debt, with debates extending into subsequent years due to a projected budget gap of over 172 billion euros by 2029.

The budget includes a total planned net borrowing of 845 billion euros over five years, financed through new debt, special funds, and extra loans, with significant allocations for defense, infrastructure, climate projects, and social programs.

Despite record-high federal spending, actual investments in core sectors like infrastructure and digitalization are decreasing, partly because much funding is funneled into special funds and debt, raising concerns about compliance with constitutional rules.

Finance Minister Lars Klingbeil defended the budget during the Bundestag debate, emphasizing investments in infrastructure, digital reform, and modernization efforts aimed at making Germany more effective and future-ready.

Klingbeil highlighted that over 20% of the budget is allocated to investments for economic growth and job security, with a focus on restoring growth amid high unemployment concerns.

A special fund of 500 billion euros has been established for multi-year investments in infrastructure, energy, healthcare, and transportation, with around 37 billion euros planned for use this year on projects like roads, railways, and hospitals.

This fund is financed entirely through debt, and its use has raised questions about transparency and adherence to constitutional investment rules, as much of it replaces traditional budget allocations.

The Greens criticized the government for missing a 'historic opportunity' to stimulate the economy and for insufficient investments in future technologies, while advocating for higher taxes on large fortunes to fund more strategic growth initiatives.

Opposition parties, including the Greens and Left, also criticized the use of special funds and increased debt, arguing that these measures undermine fiscal transparency and fail to deliver tangible benefits for the population.

Looking ahead, the government faces a projected budget gap of around 34 billion euros in 2027, prompting discussions about austerity, welfare reforms, and increased taxation on the wealthy to address future shortfalls.

The ruling coalition has faced criticism over record debts of 81.8 billion euros and the perception that citizens do not benefit proportionally from the increased spending, raising questions about fiscal sustainability.

The 2025 budget totals approximately 502.55 billion euros, with around 62.7 billion euros allocated for investments, while social welfare programs like Bürgergeld and pensions remain the largest expenditure items.

This is the first budget under Chancellor Friedrich Merz’s government, following the collapse of previous coalition negotiations over a three-billion-euro deficit and borrowing measures, marking a new phase in Germany’s fiscal policy.