A possible black-red coalition appears to be facing significant financial problems. According to a report, a budget planning gap of 130 to 150 billion euros is expected to persist until 2028, as revealed by Federal Finance Minister Jörg Kukies (SPD) in a recent round of talks with the Union and SPD, as reported by the “Handelsblatt” (Tuesday edition) citing several sources familiar with the situation. CDU leader Friedrich Merz had previously announced a “cash audit” to clarify the federal budget’s financial situation, which has now turned out to be even more precarious than expected.
The Federal Ministry of Finance had already anticipated significant budget shortfalls in its financial planning, with a gap of around 28 billion euros in 2028 alone, needed to meet the NATO’s two-percent defense spending target after the expiration of the federal “special fund” for the military. The shortfall has now grown due to rising costs and weaker tax projections. The additional higher defense spending, discussed since the election of Donald Trump as US President, is not yet included in these calculations. The Union and SPD are seeking to increase the existing federal “special fund” for the military.
The Federal Ministry of Finance had previously estimated the budget shortfall for the 2025 budget to be around 26 billion euros, which has now grown to around 30 billion euros, according to the report. The ministry also forecasts “handling needs” of 13 billion euros for 2026 and 2027 and 39 billion euros for 2028, in its medium-term financial plan. Additionally, the ministry lists “global minus expenditures” of 33 billion euros for 2026 to 2028, resulting in a total budget shortfall of around 130 billion euros. However, the shortfall could increase to as much as 150 billion euros, considering potential additional expenses in the social sector and weaker tax revenues, according to sources in the coalition talks. Economists also expect even larger budget shortfalls. “If one also takes into account the financial gaps of municipalities and social insurance funds, for which the federal government should actually be responsible, the federal budget shortfall from 2026 to 2028 is likely to be around 200 billion euros” said Jens Hogrefe of the Kiel Institute for the World Economy.