Budget 2026: Extra money for everything from roads to social housing in Germany

The German Federal Cabinet has approved a draft budget for 2026, with spending forecast to increase by 3,5 percent. Here’s an overview of where the money is going, and which government departments will face cuts. 

Germany unveils draft budget for 2026

Just one month after the 2025 budget was finally approved, Finance Minister Lars Klingbeil last week unveiled his draft budget for 2026, a 3.442-page document that plans high spending to stimulate growth in Germany. The minister described the budget as a “milestone to ensure more growth and justice in our country at record speed”, Tagesschau reports.

"We are investing in the future now so that our country will be more modern, fairer, and safer tomorrow,” Klingbeil said as he presented the budget at a press conference in Berlin. “We want new jobs to be created, fair wages to be paid, and affordable housing to be available.” 

New budget prioritises spending to boost the economy

With a total expenditure of 520,5 billion euros, an extra 174,3 billion euros in new debt, the new budget focuses on investment, structural reforms, and modernisation. In layman’s terms, it promises more money for pretty much everything - from railways, bridges and roads to schools, daycare centres, hospitals, climate protection and defence - in an attempt to stimulate the economy and improve German infrastructure. 

The largest chunk of the budget (nearly 200 billion euros) is earmarked for the Ministry of Labour and Social Affairs, and most of that money is in the form of federal subsidies for the pension insurance system. A further 41 billion euros will cover the citizens’ allowance (Bürgergeld). 

The Federal Ministry of Defence will get the biggest funding boost, with its budget rising by more than 20 billion euros to more than 80 billion euros. Together with 25,5 billion euros from the Bundeswehr Special Fund, that will see defence spending reach approximately 2,8 percent of GDP. 

Funding earmarked for Deutschlandticket, daycare and social housing

Other projects that have been greenlit include:

• More funding for social housing
• More money for daycare in Germany
• Continued funding for the Deutschlandticket
• Reducing the VAT rate on meals in restaurants from 21 percent to 9 percent
• Increasing the commuter allowance to 38 cents per kilometre
• Lowering network charges and scrapping the gas storage levy to help cut the cost of energy in Germany

However, some initiatives will not go ahead in 2026:

• The proposed reduction in air travel ticket taxes has been scrapped.
• Households and businesses will not receive any relief for electricity bills. 

When will the 2026 budget be passed?

The budget now faces a long road to getting passed by the German parliament. Indeed, it was squabbling over the 2025 budget that ultimately brought down the previous German government, so the budget’s progress will be keenly monitored. 

It will face its first reading in the Bundestag at the end of September, followed by a second reading in November. All being well, it should be passed by the Bundesrat just a few days before Christmas.