Preparations for the 2027 German federal budget are already in full swing, significantly ahead of the official launch in January. Senior state secretaries responsible for various departmental budgets have met repeatedly since September, tasked with achieving a mandated savings target of one percent of total expenditures – roughly five billion euros – as directed by Finance Minister Lars Klingbeil (SPD). According to sources within the Federal Ministry of Finance (BMF), only approximately half of the ministries have thus far submitted their proposed contributions, including key departments such as the Interior, Labour and Social Affairs and the BMF itself.
The Labour Ministry’s proposed savings of nearly two billion euros represent a substantive portion of the anticipated reductions, but significant contributions remain outstanding from ministries overseeing Transport, Justice and Economic Cooperation. Klingbeil aims to collect contributions from all departments by year’s end, which would cover roughly half of the estimated eleven billion euro financial shortfall. This deficit has shrunk in recent months due to the postponement of a ten billion euro reserve initially earmarked for 2026, allowing it to be rolled over to the subsequent fiscal year, coupled with slightly better-than-expected tax revenues and a delay in the implementation of the “mothers’ pension” program.
However, Klingbeil has also proactively requested his cabinet colleagues to submit further austerity proposals for future years, anticipating even larger funding gaps. BMF officials project a deficit of sixty billion euros for 2028 and a staggering sixty-four billion euros for 2029. To address these looming challenges, ministries are being asked to propose cuts to subsidies and reductions in statutory benefits, particularly those pertaining to pension, health and long-term care insurance.
Should ministries fail to provide sufficient proposals, Klingbeil intends to instruct his officials to develop their own austerity measures. While the formal budget planning process will commence with the traditional circular letter in January, a crucial shift from standard procedure will see the key parameters of the 2027 budget not finalized until April, rather than the usual March timeframe. The government’s draft budget for 2027 is anticipated to be approved by the Federal Cabinet by the end of June or early July next year. This accelerated and deeply challenging process raises serious questions about the sustainability of social programs and the potential impact on vital public services in the years to come.