Germany set for near-record new borrowing in 2027 after difficult budget deal

Germany’s parliament budget committee backed a €561 billion spending plan after weeks of coalition talks, clearing it to be passed by parliament. Total new borrowing is set to reach €210.4 billion, including about €123 billion from the core budget.

The coalition scrapped a proposed tax on plastic packaging and delayed a tax on sugared drinks until 2028. It also delayed a planned cut to electricity taxes and rolled back plans to cut benefits for children in low-income families. The government says the budget will support infrastructure, defence and social cohesion; opposition parties accused it of concealing borrowing and spending.

Germany’s Council of Economic Experts forecast 1% economic growth next year and said the government needed to rein in defence and retirement-benefit spending to control deficits. Berenberg chief economist Holger Schmieding said the budget reflected the difficulty of reaching agreement and said he would have hoped for more welfare cuts and tax reductions.