Germany Approves Record Investments, Defense Boost in 2025-26 Budgets

Germany's cabinet has approved an ambitious budget for 2025 and a financial framework for 2026 featuring record investments aimed at revitalizing its economy after two years of stagnation. The 2025 budget plans investments of 115.7 billion euros, increasing to 123.6 billion euros in 2026, supported by a special 500 billion euro infrastructure fund and extensive borrowing nearing 400 billion euros. A significant portion of spending is allocated to modernizing transport infrastructure, including around 166 billion euros through 2029 for rail networks, motorway bridges, and waterways, with a focus on digitalizing rail systems. Defense spending is set to rise notably, reaching 3.5% of Germany's GDP by 2029, reflecting Germany's growing role within NATO amid shifting defense dynamics. Although debt interest payments are expected to double by 2029, Germany's relative debt servicing costs remain lower than those of other major European economies. Lawmakers are expected to finalize the 2025 budget by September as the government aims to secure long-term economic growth and resilience.