Berlin, July 30
Germany's cabinet on Wednesday approved the federal budget draft for 2026, marking the second consecutive year of record-high investment as the government aims to modernize infrastructure and bolster national security.
"Our primary goal is to safeguard jobs and ensure new economic strength," Klingbeil said. "We are investing today to make Germany more modern, fair, and secure tomorrow."
Despite the ambitious scope, the government faces mounting concerns over long-term fiscal sustainability. The sweeping financial plans foresee a funding gap of 172 billion euros through 2029, roughly 30 billion euros more than Klingbeil projected in June. The widening deficit is primarily driven by proposed corporate tax cuts and compensatory payments to state and local governments.
With cabinet approval in place, the draft budget now moves to the Bundestag for parliamentary debate and further approval.
Turning to the economy, Merz acknowledged that Germany is currently in recession. He identified excessive bureaucracy, high energy costs, and a burdensome tax regime as key obstacles to growth. To counter these challenges, he pledged a return to economic expansion through investment and structural reforms. The focus, he said, would be on boosting competitiveness and safeguarding jobs.