Germany Passes Budget With Vast New Borrowing

German lawmakers on Friday passed 2026 spending plans backed by bumper borrowing as Chancellor Friedrich Merz battles to revive Europe’s top economy through a huge investment package.

Members of parliament backed the spending plans by 322 votes to 252, approving central government spending of 524.5 billion euros ($607.5 billion) for the year, boosted by 98 billion euros’ worth of debt for the core budget.

Including debt taken on for defence spending as well as a special fund for infrastructure investment, total planned debt for the year reached around 180 billion euros , the second-largest single-year increase in history after the Covid-19 pandemic in 2020.

Faced with a stagnant economy and the security threat from Russia, Merz broke with party and national tradition earlier this year by ramping up borrowing, exempting most defence spending from a constitutionally-enshrined debt brake and setting up a special fund for infrastructure.

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But critics, including some economists, have said that the money’s effects could be short-lived if it is not accompanied by reforms and have warned against using it for day-to-day spending as opposed to long-term investment.

Speaking on Wednesday during a debate on the budget, opposition leader Alice Weidel of the far-right Alternative for Germany (AfD) said the government was “throwing money around as if there is no tomorrow”.

“With the financial coup d’etat — euphemistically referred to as a special fund — you have burdened Germany with its largest mountain of debt in post-war history,” she said.

Finance Minister and Vice Chancellor Lars Klingbeil of the centre-left SPD warned MPs on Tuesday of mounting challenges from 2027 onwards, pointing to a hole of more than 30 billion euros for the budget that year.

“The bulk of the work is still ahead of us,” Klingbeil said, calling the passage of the 2026 budget “a warm-up”.