Weekly proceedings in the German federal parliament, Bundestag
In a significant shift towards a climate-neutral, digital, and sustainable economy, the Federal Budget of Germany for 2023 and subsequent years has been announced, prioritizing substantial investments and fiscal measures.
The centerpiece of this budget is a EUR 500 billion infrastructure fund set up for 12 years, with the following allocations:
- EUR 300 billion for national infrastructure, including transport, energy, healthcare, education, digitalization, and research and development (R&D).
- EUR 100 billion for the Climate and Transformation Fund, supporting renewables, hydrogen technologies, climate-friendly industry innovations, and building renovations.
- The remaining EUR 100 billion is allocated to state-level projects based on a formula considering tax revenue and population.
This Special Fund operates independently of the core federal budget and is exempt from Germany’s constitutional debt brake, allowing greater flexibility in financing these priorities without strict borrowing limits.
Other budget details and priorities include:
- Expanded fiscal autonomy for federal states (Länder), enabling regional investments with increased deficit capacities.
- Increased defense spending, with exemptions and borrowing to strengthen military capabilities, while still significantly emphasizing climate and digitalization investments.
- The German Institute for Economic Research (DIW Berlin) projects positive GDP growth uplift driven by these investments, signalling a shift from austerity towards resilience-building measures.
However, budgetary pressures remain, with planned austerity in social sectors noted alongside massive defense funding increases by 2026, indicating competing priorities within federal spending plans. The total spending for 2026 is projected to be about EUR 520 billion, with record borrowing planned to support investment and defense.
In addition, Germany will take on more responsibility and invest in its alliance and defense capabilities, providing support to Ukraine militarily, financially, diplomatically, and humanitarianly. Funds for the renovation of communal facilities in the areas of sport, youth, and culture will continue to be provided from the KTF.
Future investments are being stabilized at a record level of around EUR 52 billion per year over the financial planning period. Total investment expenditures in 2023 will exceed EUR 58 billion, with around EUR 8.5 billion allocated for acquisitions for the Bundeswehr.
The budget proposal sets the course for Germany to become independent from Russian energy as quickly as possible. The level of urban development funding is being maintained at EUR 790 million, with an additional EUR 500 million allocated for affordable housing.
More than EUR 2 billion is available for humanitarian aid, and Germany remains the second-largest donor nation, with over EUR 22 billion in public spending on development cooperation (ODA expenditure).
As Russia wages an aggressive war against Ukraine for more than six months, Germany and its international partners in the EU and NATO stand firmly on the side of the Ukrainians. The budget draft provides funds to support Ukraine in its fight for freedom and democracy.
In summary, Germany’s federal budget framework from 2023 onward significantly prioritizes climate neutrality, digital transformation, and sustainable economic development, backed by a dedicated multi-hundred-billion euro fund and complemented by structural fiscal reforms enhancing investment capacity.
Science will receive investments from the EUR 300 billion allocated for national infrastructure, which includes healthcare and research and development (R&D). The budget also sets aside funds for the renovation of communal facilities in the areas of sport, youth, and culture, indicating a focus on health-and-wellness and sports.
