By Maria Martinez
BERLIN (Reuters) -The German government will on Wednesday back a 2026 draft budget which includes record investment of 126.7 billion euros ($147.57 billion), as part of its fiscal bazooka for infrastructure and defence, finance ministry sources said.
The 2026 budget comes together with a medium-term financial framework until 2029, with the whole package expected to be approved by the cabinet on Wednesday.
The spending surge is part of the government’s plans to revive its lethargic economy, the only G7 economy that failed to grow for the last two years and which the government forecasts will stagnate this year.
The investment surge in 2026 and subsequent three years will be possible thanks to a special 500 billion euro ($583 billion) infrastructure fund and an exemption from debt rules for defence spending approved in March.
The special fund for infrastructure, which is also excluded from Germany’s “debt brake” that limits borrowing to 0.35% of GDP, will add borrowing of 58.9 billion euros in 2026.
For defence, the 100-billion-euro special fund created by former Chancellor Olaf Scholz following Russia’s invasion of Ukraine, which will be exhausted in 2027, will add 25.5 billion euros in borrowing in 2026.
In the core budget, borrowing will go up from 33.3 billion euros in 2024 to 89.9 billion euros in 2026, the sources said.
Adding those three components, total borrowing in 2026 will be 174.3 billion euros.
The budget discussions will start in parliament at the end of September before its approval in both houses of parliament at the end of the year.
($1 = 0.8586 euros)
(Reporting by Maria Martinez;Editing by Alison Williams)
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