German draft 2027 budget under fire for new debt, climate cuts

Germany's draft 2027 budget came under attack on Monday for proposed cuts to climate funding and for raising debt levels, as the Cabinet prepared to approve the multibillion-euro spending plan. 

The government is planning to spend €555.4 billion ($634.1 billion) next year, with net new borrowing of €118.7 billion, according to Cabinet information seen by dpa. 

This is in addition to new debt from a special fund for infrastructure and climate neutrality and a special fund for the Bundeswehr, Germany's armed forces.

Overall, new borrowing in 2027 is expected to total more than €200 billion.

"The planned increases in spending and debt in the budget are alarming," said Tanja Gönner, director general of the Federation of German Industries. "Despite massive new borrowing and high tax revenues, the federal government has failed to present a sound budget plan."

Cuts to climate fund

The government is planning cuts to the special climate fund, which helps subsidize energy-efficient buildings, including the purchase and installation of climate-friendly heating systems - a politically sensitive issue.

Previously committed subsidies will not be touched, the Finance Ministry said. 

Under the draft, revenues from emissions trading that have not yet flowed into the climate fund are to be partially redirected to plug budget holes next year, to the tune of €2.7 billion.

"Finance Minister [Lars] Klingbeil wants to plunder the Climate and Transformation Fund in order to cut income tax for higher earners - this is a shameless misuse of funds and a scandal for a party that claims to stand for progress and the welfare state," said Mauricio Vargas of Greenpeace.

Climate organization GermanZero described the cuts as an "open declaration of war" on climate measures.

Further cuts likely

Klingbeil, of the Social Democrats, was able to close multibillion-euro funding gaps for next year but will have to draw around another €6.8 billion ($7.8 billion) from a reserve fund to do so, according to the Cabinet information seen by dpa.

At the end of April, when key parameters were presented, the gap was €21 billion. Klingbeil had obliged all ministries to make savings of 1%. The coalition also agreed on a higher tobacco tax and a plastics levy. Government grants to the social security funds are to be scaled back, though several billion euros in funding gaps remain for future budgets.

Looking ahead, the Cabinet document predicts a funding gap of €22 billion in 2028, €38 billion in 2029 and €47 billion in 2030. Sharply rising interest costs are a major problem.

"We have to consolidate - there is no way around it," Klingbeil told public broadcaster ARD. 

Next steps

The draft budget is to be debated in parliament after the summer recess. The Bundestag is expected to pass the budget later this year.

According to the parliamentary calendar, the summer recess starts on July 10 and ends on September 7.