Berlin borrows €203 billion for 2027 budget

Germany's 2027 draft budget adds up to €203 billion in new borrowing across three pots: the regular federal budget, a defence fund and an infrastructure fund (Tagesschau, ZEIT). Germany can handle that debt. It borrows at roughly 2.98% on 10-year bonds, while France pays around 3.68% for the same maturity (Boursorama). The real story is not whether Berlin can afford this. It is what gets crowded out once defence moves to the front of the queue, and whether the rest of Europe can keep up.

Three borrowing buckets, one shrinking middle

Germany's constitution includes the Schuldenbremse (debt brake), a rule that limits regular federal borrowing to a sliver of GDP once the economic cycle is stripped out. Berlin has not scrapped the rule. It has routed the big money around it. Defence spending above 1% of GDP can now be financed outside the cap, and two special funds borrow separately from the main budget (ZEIT, taz).

The breakdown: €118.7 billion in core-budget borrowing, €54.9 billion from the infrastructure fund, €30 billion from the Bundeswehr fund (ZEIT, Reuters).

Defence spending alone reaches roughly €109.8 billion. Add Ukraine aid and security-related lines, and the total hits about €130 billion (ZEIT). Those numbers are protected. Everything else competes for what remains.

Finance Minister Lars Klingbeil closed a €21 billion gap through one-percent spending cuts across ministries, a higher tobacco tax, a new plastics levy, reduced subsidies for social insurance and drawdowns from pre-2019 reserves (Deutschlandfunk). The reserve trick used €6.8 billion, leaving just €3.9 billion for future years (Süddeutsche Zeitung). That cushion is almost gone.

Who actually pays

The single largest budget line is federal payments to the pension system, at roughly €132 billion (Süddeutsche Zeitung). No coalition will touch pensions. So the cuts land on people with less political weight: households losing heating support, development-aid recipients in poorer countries, and ministries forced to trim subsidies. Germany's ODA (official development assistance, the money a government spends helping poorer countries) is on track to fall to 0.43% of national income by 2029 (DonorTracker).

Then there is interest. Federal debt-service costs are projected to rise from €41.9 billion in 2027 to €80.7 billion by 2030 (taz, Süddeutsche Zeitung). Every euro that goes to bondholders is one unavailable for rail repair, schools or future tax relief. BNP Paribas estimates German debt could reach 71% of GDP by 2030, with 10-year yields around 3.3% by late 2026 (BNP Paribas). Running the German state is getting permanently more expensive.

The European gap this opens

Germany's borrowing advantage over France, that 0.7-percentage-point spread on bond yields, means the same defence euro costs Paris measurably more. Countries with cheaper borrowing buy readiness faster. Countries with higher yields either borrow at greater cost, cut deeper elsewhere, or wait for EU joint financing that may not arrive in time. Italy has an approved EU SAFE loan line of up to €14.9 billion for defence procurement but has not yet signed the agreement with the Commission (Quotidiano Nazionale). The Fondation Robert Schuman has warned that defence built only on unequal national balance sheets risks splitting Europe into those who can arm and those who cannot (Fondation Robert Schuman).

On the eastern flank, the question is whether German money becomes actual capability. The Bundeswehr exercised in Lithuania with 2,900 soldiers, tanks and combat helicopters (Bundeswehr). But Berlin still plans to buy some weapons in the United States, which limits the industrial benefit for European supply chains (RMF24).

This budget makes German rearmament financeable. It does not yet prove that Germany is building European defence capacity rather than buying its own security while its neighbours fall behind.