German auditors sound alarm over level of debt in 2026 draft budget

The German state risks descending into a vicious circle of debt, according to a report by the country's federal auditing authority.

Core services provided by the state can no longer be funded by revenue in the long term, the agency said in an assessment of the 2026 draft budget, which is set to be debated in parliament in the coming weeks.

According to the auditors, rising expenditure is also not matched by a corresponding increase in the state's capacity to deliver services.

German Finance Minister Lars Klingbeil has earmarked spending totalling some €520 billion ($616 billion) for 2026.

The core budget includes almost €90 billion in debt, in addition to over €84 billion in special loans for investment in infrastructure and defence.

"Anyone who plans to finance almost every third euro 'on credit' in 2026 is a long way from sound financial management," the auditing authority said.

The agency said taking on new debt was only a short-term solution to reducing the pressure for reform.

"In the medium term, this will result in a federal budget in which a very significant proportion is tied up in interest payments," the auditors said, warning that this might result in the country being sucked into a debt spiral.