Global crises and conflicts are disrupting supply chains, driving up energy prices and hampering economic growth. The Federal Government is tackling these challenges with a strong sense of purpose. It has made far-reaching decisions on reforms to strengthen the economy, safeguard jobs and ensure that social security systems are fit for the future. With the Cabinet’s adoption on 6 July of the federal budget for 2027 and the financial plan up to 2030, the Federal Government continues to focus on a three-pronged approach comprising investment, structural reforms and consolidation.

Federal Minister of Finance Lars Klingbeil presented the budget to the German Bundestag on 8 September, outlining the Federal Government’s principles: “We are investing in our future, we are investing in our security, and we are securing the freedom to ensure that we can still act tomorrow. This budget lays a new foundation for growth, employment and social security.” 

Future programme for the modernisation of the country 

With the 2027 federal budget, the Federal Government is continuing its course of strengthening security and revitalising the economy. A total of around 118 billion euros is available. These record investments are intended to modernise the country, safeguard jobs and strengthen Germany’s capacity for innovation. This investment drive will be consistently advanced in the coming years. 

The Special Fund for Infrastructure and Climate Neutrality plays a key role. Over 36 billion euros has been earmarked for federal investment in 2027. In addition, there is 10 billion euros for the Climate and Transformation Fund, as well as around eight billion euros to support the federal states and local authorities.   

The aim is to put an end to the investment backlog in Germany. “We are building the infrastructure of tomorrow. We are turning the Special Fund for Infrastructure and Climate Neutrality into a unique programme for our country’s future,” said Federal Minister of Finance Lars Klingbeil. “The diggers are at work; bridges and tracks are being repaired. Schools, nurseries and hospitals are being refurbished; fire stations, sports grounds and affordable housing are being built.”     

Focus on security

The Federal Government is also increasing defence spending in order to improve Germany’s deterrence and defence capabilities. The primary aim is to prevent military conflicts.  

“Just as we are investing heavily in infrastructure and innovation, so too are we investing heavily in our security and defence capabilities,” said Minister of Finance Lars Klingbeil. Planned defence spending is set to rise significantly next year to over 109 billion euros, supplemented by funds from the Special Fund for the Federal Armed Forces. Overall, the Federal budget will help strengthen resilience to crises. 

Easing the burden on the federal budget

The Federal Government is implementing the consolidation measures agreed within the coalition step by step. “We are consolidating to give us more scope for action again. Investment and consolidation therefore go hand in hand,” said Klingbeil. This capacity for action is to be created, amongst other things, through a drastic reduction in bureaucracy, an even more effective crackdown on financial and tax crime, the taxation of cryptocurrencies and adjustments to tobacco duty. Financial aid is to be reduced.

The Federal Government has begun a systematic reduction in subsidies. In 2027, this will result in savings of just under three billion euros. In the coming years, this figure is set to rise significantly. Furthermore – as agreed in the coalition agreement – further cuts are being made to funding for development cooperation.   

Cost savings by the Federal Government

Cost-saving measures will begin within the federal administration itself. More efficient processes and structures in the Federal Ministries will save 1.2 billion euros in the federal budget next year. The Federal Government is reviewing all measures to assess their impact and has thus already managed to achieve cross-departmental savings of four billion euros for 2027. This is in line with the target of a one per cent saving per year for each Ministry. The Federal Government will continue along this path: from 2028 onwards, further savings of eight billion euros a year are expected to be achieved in this way.   

The Federal Government is also continuing with the job cuts in the civil service that have already begun – with the exception of security agencies. Savings of two per cent in the personnel area are targeted for 2027. Overall, savings of eight per cent will be achieved in the personnel area by 2029. 

In the Budget Accompanying Act, the Cabinet has also approved further measures to strengthen the Federal budget. The plan is to increase the tax rate on certain alcoholic drinks – other than beer and wine. Furthermore, the federal subsidy to the statutory pension scheme is to be reduced by one billion euros in 2027, which will result in a corresponding reduction in the burden on the federal budget.