Germany’s state-level financing deficit significantly decreased in the first half of 2025, reaching 28.9 billion euros. This represents a decrease of 19.4 billion euros compared to the same period in 2024, according to data released Friday by the Federal Statistical Office (Destatis). As a percentage of Gross Domestic Product (GDP) in current prices, the deficit for the first half of 2025 amounted to 1.3 percent.
The federal government accounted for the largest share of the overall state financing deficit, contributing 16.7 billion euros. However, the federal deficit itself experienced a substantial reduction of 10.5 billion euros compared to the first half of 2024. The states (Länder) also registered a significant decrease in their financing deficit, falling by 10.3 billion euros to 1.3 billion euros (compared to 11.6 billion euros in the first half of 2024).
Conversely, the financing deficit of municipalities increased by 4.7 billion euros to 14.2 billion euros (9.5 billion euros in the first half of 2024). Social security funds, however, recorded a surplus of 3.3 billion euros during the period, a change from the neutral position recorded in the first half of 2024.
The overall state financing deficit of 28.9 billion euros for the first half of 2025 is the result of a difference between revenues of 1.042 trillion euros and expenditures of 1.0709 trillion euros. Revenues increased by 6.5 percent year-on-year, while expenditure growth was slower at 4.3 percent.
Tax revenues increased by 5.1 percent compared to the same period last year. Value-added tax saw a notable increase of 6.9 percent, while income tax revenues rose by 4.6 percent. Social contributions also saw a considerable rise of 8.9 percent, driven by increases in supplementary contributions to statutory health insurance, as well as adjustments to contribution rates and assessment ceilings for long-term care insurance in January 2025. State interest income, however, fell by 18.9 percent.
Monetary social benefits, such as pensions and unemployment benefits, increased significantly, rising by 20.3 billion euros (+5.8 percent year-on-year). Social benefits in kind, including medical and hospital services, pharmaceuticals and social welfare benefits, rose by 13.5 billion euros (+7.1 percent).
Expenditure increases were also driven by a rise in state employee compensation of 10.9 billion euros, a 6.3 percent increase year-on-year. This increase in expenses was partially offset by a 12.9 percent reduction in subsidies, primarily due to lower compensation payments for renewable energy.
State interest expenditure increased by 5.8 percent to a total of 24.3 billion euros in the first half of 2025. Gross investment rose by 3.7 percent to 59.6 billion euros, according to the statistical office.