The Institute for Economic Research (IW) has issued a critical assessment of the budgetary plans presented by Federal Finance Minister Lars Klingbeil. While the budget initially appears sound, the IW contends that this perception is misleading, as significant underlying challenges have been addressed through what they describe as “accounting maneuvers.
The assessment highlights several factors contributing to the IW’s concerns. On the expenditure side, inefficient and costly projects, specifically mentioning the ongoing “Mothers’ Pension III” are putting a strain on the federal budget. Simultaneously, increasing interest rate payments are projected to substantially curtail the government’s financial flexibility in the coming years.
To safeguard essential investments and defense spending, special funds such as those designated for infrastructure, climate neutrality and climate transformation are being kept outside of the debt brake – a constitutional rule limiting government borrowing. The IW’s analysis indicates that, as early as 2026, over €20 billion earmarked for defense spending may be excluded from the debt brake, a sum originally intended to be funded from the regular budget.
Following a formally balanced budget projected for 2026, the IW anticipates a considerable surge in future budgetary needs from 2027 onwards. The Institute emphasizes that these emerging needs will necessitate more robust structural savings to proactively avoid cuts to infrastructure investments. Experience suggests that such infrastructure projects are particularly vulnerable to budget reductions or face delays due to protracted planning and procurement processes. Consequently, the planned investment offensive risks failing to deliver the anticipated impact.