Berlin Bends Its Debt Brake

Germany’s federal auditors put a hard warning in front of the Bundestag on 3 September: Berlin is drifting towards a debt trap. Federal debt, they said, could rise from about €1.5 trillion at the end of 2020 to at least €3 trillion by 2030 if the government carries on with its present spending plans (FAZ, Bundestag).

For the rest of Europe, this is not a German accounting story. It is a question of who Germany is prepared to finance. Europe’s largest economy is borrowing heavily for defence and infrastructure at home, while pressing for roughly €400 billion to be cut from the next EU budget (Investir/Les Echos). A Germany with more debt of its own has less room, and less political appetite, to be generous elsewhere.

How €200 billion a year slips past the debt brake

The Bundesrechnungshof, the federal audit office that checks whether public money is being spent lawfully, is not forecasting a sovereign debt crisis. Its point is more precise. Borrowing is being routed around Germany’s debt brake, the constitutional rule that limits the federal structural deficit to 0.35% of GDP (Bundestag).

That rule was designed to stop ordinary budgets from sliding into large deficits. In March 2025, Berlin changed the constitution and created two major exits from it. Defence spending above 1% of GDP is now outside the brake. A separate €500 billion infrastructure and climate fund can also borrow in its own name over 12 years (BMF).

The borrowing curve is steep. Core federal net borrowing is due to rise from €98 billion in 2026 to €167.3 billion in 2030. Once special funds are included, new borrowing in 2027 alone comes to about €203 billion (Bundestag, Onvista/Reuters).

The interest bill is where those figures stop being abstract. The government’s own projections put interest spending at €80.7 billion by 2030, out of total federal spending of €635.4 billion (Bundestag). That means roughly one euro in every eight would go on servicing debt before Berlin gets to schools, railways or tax cuts.

Borrowed money, unbuilt bridges

The argument for borrowing is not flimsy. The Bundesbank has said Germany’s net fixed investment turned negative in 2024 and 2025 for the first time since reunification. In plain terms, the country was wearing out roads, railways and energy grids faster than it was replacing them (Bundesbank).

But there is a long distance between permission to borrow and the building of a bridge. The ifo Institute found that in 2025 the government borrowed €24.3 billion through the infrastructure fund, while federal investment rose by just €1.3 billion (ifo). Much of the new debt appears to have replaced money the ordinary budget would have spent anyway, rather than adding fresh capacity.

Zeit reported that only about 10% of the infrastructure fund had been used so far (Zeit). The Finance Ministry says the fund’s real effect should be judged across 2025–2028 (BMF). That may prove fair. For now, it is an argument about future delivery, not evidence of it.

Who pays across Europe

When Germany borrows more, the price of money moves for everyone in the eurozone. German bonds are the reference point for safe debt in Europe. If that baseline rises, investors ask more from other governments as well. German 10-year yields have already moved above 3.36%, their highest level in 15 years (Euronews, Le Monde).

France is feeling that pressure from a weaker starting point. Its public debt stands at 115.6% of GDP (Insee), and it is already under the EU’s excessive-deficit procedure, the formal process that pushes governments with oversized deficits to cut spending or raise taxes. The French Senate estimates that France’s annual contribution to the next EU budget could rise from €26 billion to €36 billion (Sénat). Higher market rates make that argument harder in Paris.

The fight now moves into the next seven-year EU budget for 2028–2034, which the Commission has proposed at about €2 trillion (European Commission). Six net contributors, including Germany and the Netherlands, are demanding deep cuts (NOS).

For Ireland, the immediate sums are not the same as they were in the old cohesion-fund years, when Europe was helping to build out the State. But the political pattern matters. A tighter EU budget means harder choices on the programmes smaller and peripheral economies care about: research, regional investment, agriculture, energy links and the infrastructure that keeps the single market feeling real rather than theoretical.

Poland has a sharper exposure. Warsaw fears German budget pressure will mean cuts to cohesion funds, the EU money used to narrow development gaps between richer and poorer regions. At the same time, about 28% of Polish exports go to Germany, so German stagnation lands directly on Polish producers (Rzeczpospolita).

Germany’s partners now have evidence for a suspicion that has been building quietly: Berlin can find space for German priorities faster than it can find space for shared European ones. The answer depends on whether the infrastructure fund becomes real investment, or remains a way to dress old spending in new debt.