Germany to Borrow Over €500 Billion Next Year as Spending Rises
Germany is preparing for a sharp increase in government borrowing as it shifts away from fiscal restraint and toward large-scale public spending.
Next year, the federal government plans to raise more than €500 billion through debt issuance, marking a clear break from the cautious approach that defined the past decade.
Key Takeaways
- Germany plans record debt issuance next year to fund infrastructure repairs and higher defense spending
- The shift marks a move away from strict fiscal restraint as growth remains weak
- Despite higher borrowing, Germany still has ample fiscal space compared with other major economies
The move reflects growing pressure to address long-neglected infrastructure and rising security demands across Europe.
A New Fiscal Phase
For years, Germany relied on low debt and tight budgets as economic strengths. That approach is now changing. With roads, railways, energy systems, and digital infrastructure in need of repair, the government has committed to a long-term investment drive worth hundreds of billions of euros.
Defense spending is also climbing. Berlin is accelerating military upgrades as geopolitical risks rise, particularly following Russia’s invasion of Ukraine. Recent parliamentary approvals signal that defense will remain a major budget priority rather than a one-off expense.
Debt Markets Absorb the Shift
To fund these plans, Germany will significantly expand bond issuance across both long-term and short-term markets. The government is also widening the range of maturities it offers to investors, reflecting expectations that elevated borrowing will continue for several years.
Bond markets have so far taken the increase in supply in stride, even as yields have climbed this year. Rising yields suggest investors are already pricing in heavier issuance and looser fiscal policy across Europe.
Long-Term Borrowing Gets Harder
The timing is not ideal. Across Europe, longer-dated bonds have become less attractive as yield curves steepen. Demand from traditional buyers such as pension funds has weakened, forcing governments to rethink how they structure debt sales.
Germany’s decision to add new bond maturities reflects both necessity and adaptation to these market conditions.
Room to Spend, But Risks Remain
Despite the record borrowing plans, Germany still has far more fiscal room than most advanced economies. Its debt burden remains comparatively low, giving policymakers confidence that higher issuance is manageable.
The bigger challenge is growth. The economy has barely expanded since the pandemic, and core industries such as autos and chemicals face pressure from global competition and trade tensions. While the government expects spending to help revive activity, results are far from guaranteed.
For now, Germany is making a clear bet: that borrowing more today is preferable to stagnating longer.
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