Political failure in a welfare state translates almost immediately into rising social expenditures. Their disproportionate increase shows one thing clearly: Germany is heading for troubled times.
“Budgetary policy is the sovereign right of parliament”—so goes the well-worn phrase when lawmakers gather for their annual budget debate. If that phrase ever held truth, then today the sovereign stands exposed: the king has no clothes.
The budget for 2025, adopted by Germany’s federal cabinet on June 24th, amounts to a fiscal policy capitulation. It foresees €81.8 billion in new net borrowing for the core budget—while an additional €60 billion is parked off the books in a so-called “special fund,” also debt-financed. The total federal budget climbs to approximately €503 billion, an increase of 6.1% over the previous year. For 2026, Finance Minister Lard Klingbeil is already planning a further expansion to €519.5 billion.
The real net borrowing, once this off-book spending is accounted for, reaches 3.2% of GDP—exceeding the long-abandoned Maastricht threshold of 3%. When even the eurozone’s former poster child no longer adheres to the rules, one thing becomes obvious: they were never worth the paper they were printed on. And the only natural brake on such excess—a free capital market—has long been neutralized by the European Central Bank’s perpetual interventions.
The path is now clear. Or rather: the floodgates are open. Debt-financed stimulus is once again the weapon of choice against recession.
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