In order to avoid a similar fate, Merz — before even taking office — moved to pass landmark legislation loosening Germany’s so-called debt brake, overturning years of self-imposed fiscal austerity and allowing for massive spending on defense while unlocking €500 billion in borrowing for infrastructure. But despite that legislation, a major budget gap still looms, forcing Merz’s government to make tough spending decisions in the next several months.
“There’s no time to lose now,” said Klingbeil, a leader of the SPD. “Everyone in the cabinet will have to save. There’ll be a strict consolidation course, which I also demand of everyone.”
Klingbeil, who also serves as vice chancellor, proposed a combination of measures to close the 2027 budgetary gap. He said the German economy must grow more rapidly to increase revenue while, at the same time, the government reassesses subsidies.
The €30 billion gap projected for 2027 is due to increased interest rate payments and to new coalition spending on measures such as the “mothers’ pension” — a benefit that grants additional retirement credits to parents who spent time raising children instead of working — Klingbeil said.
Even if the necessary cuts are found, the coalition’s spending crunch is not likely to end in 2027. The government will have to close a budgetary gap of approximately €172 billion by 2029, according to the finance ministry.
