Federal budget 2026: Budget discussions and defense spending during the summer break

What is currently happening with the 2026 federal budget?

Despite the parliamentary summer recess, the Budget Committee of the German Bundestag is working intensively on preparing for the second reading of the law on the adoption of the federal budget for the fiscal year 2026 and on the federal financial plan until 2029. The second reading is scheduled to begin in mid-September 2025, which means a tight schedule for the parliamentarians.

The first important meetings of the Budget Committee to process the budget law took place on July 30 and 31, 2025. This unusual activity during the summer recess underscores the urgency and complexity of the upcoming budget deliberations.

Which individual plans were on the agenda of the July meetings?

Several significant budget items were on the agenda for the Budget Committee meetings on July 30 and 31. These included budget items for the Federal Council (Budget Item 03), the Federal Constitutional Court (Budget Item 19), the Federal Court of Auditors (Budget Item 20), and the Federal Commissioner for Data Protection and Freedom of Information (Budget Item 21).

However, by far the most significant item was budget line 14 for the Federal Ministry of Defence, described as the “biggest chunk” of the budget. This budget line was already discussed on July 30, with Defence Minister Boris Pistorius personally participating in the debate and defending the budget.

What are the dimensions of the 2026 federal budget?

On July 30, 2025, the German Federal Cabinet approved the draft budget for 2026. The draft budget projects total expenditures of €520.5 billion, representing a 3.5 percent increase compared to the budget planned for 2025. This figure clearly illustrates the enormous financial resources the federal government will be utilizing in the coming year.

Net borrowing in the core budget is projected to reach €89.9 billion, compared to €81.8 billion in 2025. An additional €84.4 billion in new debt will be incurred from the two special funds, bringing the total new borrowing to €174.3 billion.

What are the investment priorities for 2026?

The 2026 federal budget foresees record investments totaling €126.7 billion. These investments are distributed across various areas: €56.1 billion come from the core budget, a further €48.9 billion from the special fund for infrastructure and climate neutrality, and €21.7 billion from the climate and transformation fund.

A particular focus is on transport infrastructure, with planned expenditures of €33.7 billion for 2026. €4 billion is earmarked for social housing, an increase of €500 million compared to the previous financial plan. Research and development will receive €17.1 billion, and €16 billion is planned for internal security, representing an increase of €800 million.

How is the defense budget developing?

The defense budget is undergoing a dramatic increase. Budget line 14 for the Federal Ministry of Defense is projected to rise from €62.4 billion in 2025 to €82.7 billion in 2026. This represents an increase of approximately 32 percent and makes the defense budget the second largest single budget line after the social welfare budget.

In addition to the €82.7 billion from the regular budget, a further €25.5 billion is available from the special fund for the German Armed Forces. This means that in 2026 the German Armed Forces will have more than €108 billion at their disposal for personnel, equipment, and infrastructure.

What staff increases are planned?

The German Armed Forces' personnel plans foresee a significant increase. For 2026, 10,000 additional military positions and 2,000 additional civilian positions are planned. This will increase the personnel budget for the Ministry of Defense to a total of 202,483 military and approximately 77,899 civilian positions.

In addition, with the implementation of the draft law on the new military service, 20,000 military positions for temporary soldiers will be created. Defense Minister Pistorius emphasized that military strength and operational readiness can only be achieved with as many dedicated people as possible and state-of-the-art technology.

What are the special 25 million euro proposals for logistics trucks?

Two significant proposals, each worth €25 million, have unexpectedly appeared on the agenda of the Budget Committee. These proposals concern the procurement of logistics trucks under existing framework agreements, which will allow for swift implementation.

The initial order comprises 933 unprotected and 30 protected swap body systems in the 15-ton payload class, along with the associated 400 swap body platforms and 1,000 tarpaulin/frame superstructures. These vehicles are crucial for the logistical support of the troops, as they enable the transport of supplies without additional handling equipment such as cranes or forklifts.

The second proposal concerns 425 unprotected transport vehicles (UTFs) in the military payload classes of 3.5 tons and 15 tons. These vehicles will be procured in 4x4 and 8x8 wheel configurations and will contribute significantly to the operational capability of the Bundeswehr's logistics units and formations.

How do swap body systems work?

Swap body systems (WLS) are highly mobile transport vehicles that enable particularly efficient logistics. The vehicle can easily unload the swap body with its container or palletized supplies and is then immediately ready to pick up another swap body with its load. This makes material handling faster and the supply chain more efficient and resilient.

All new swap body systems will be equipped with the ROSY (Rapid Obscuring System) smoke grenade launcher. The protected versions feature armored cabs with small side windows, which nevertheless allow for high mobility in difficult terrain. Despite the protective features, the swap body platform can transport a payload of up to 14 tons.

What framework agreements exist for these procurements?

The German Armed Forces (Bundeswehr) have extensive framework agreements with industry that allow for flexible call-offs. In June 2020, a framework agreement was concluded with Rheinmetall MAN Military Vehicles for the delivery of up to 4,000 trucks with swap body systems, running until 2027. Additionally, since July 2024, a framework agreement has been in place that allows for the call-off of up to 6,500 unprotected transport vehicles within seven years, with a value of up to €3.5 billion.

These framework agreements offer the advantage of flexible ordering for large quantities and have thus become flagship projects in military procurement. Since 2017, over 7,000 HX vehicles (including swap body trucks and tractor units) have been delivered to the German Armed Forces.

Why is procurement during the summer break so important?

The procurement during the summer recess underscores the high priority given to the modernization of the German Armed Forces. The refocusing of the Bundeswehr on national and collective defense creates a significant need for protected and unprotected mobility for the troops. Rapid procurement is crucial, which is why the new transport vehicles are scheduled for delivery to the troops in 2025.

The financial volume of the calls for proposals is in the high three-figure millions and is financed from the 2025 defense budget and the special fund for the German Armed Forces. The share from budget line 14 is accordingly included in the second draft of the 2025 federal budget and is to be fully implemented in 2025.

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What is the further timetable for the budget negotiations?

Following the summer sessions, budget deliberations will continue intensively. Committee meetings are scheduled for the weeks beginning August 25. On August 25, the Budget Committee will hold a public hearing on the 2025 Budget Accompanying Act and the draft law for the establishment of the special fund for infrastructure and climate neutrality.

The crucial reconciliation meeting of the Budget Committee is scheduled for September 4, 2025. At this meeting, the last and most contentious issues will be resolved, and the final version of the 2025 budget recommended by the Budget Committee will be adopted. The second and third readings in the Bundestag will then follow from September 15 to 18, 2025.

What will happen to the 2026 budget law?

Parallel to the deliberations on the 2025 budget, preparations are already underway for the 2026 budget. The first reading of the 2026 federal budget is scheduled for the week of September 23-26, 2025. This is two weeks later than in normal years, when the first week of parliamentary sessions after the summer recess is traditionally the week for the first reading of the following year's budget.

The Bundestag is scheduled to vote on the 2026 budget at the end of November 2025. The Bundesrat must then give its vote in December before the bill is sent to the Federal President for signature.

What financing problems exist in the medium term?

Despite high expenditures and massive new debt, a huge gap exists in the medium-term financial plan. For the years 2027 to 2029, there is a financing shortfall of approximately €172 billion. This gap is even larger than originally assumed – previously, it had been estimated at €144 billion.

The reasons for this funding gap are manifold: reduced federal revenues resulting from tax relief for states and municipalities to compensate for the growth stimulus, the finalization of the third phase of the mothers' pension, and a recalculation of interest payments. Federal Finance Minister Klingbeil therefore announced a "strict consolidation course" for the coming years and emphasized that everyone in the government must make cuts.

How are the special funds used?

Germany has several significant special funds that are managed outside the regular federal budget. The Special Fund for Infrastructure and Climate Neutrality (SVIK) comprises up to €500 billion and is intended to enable expenditures of €58.9 billion in 2026. This special fund creates a long-term financing basis for investments to modernize Germany.

The €100 billion special fund for the German Armed Forces is projected to provide €25.5 billion in expenditures in 2026. Both special funds are financed exclusively through loans. The special fund for the German Armed Forces is planned to be exhausted by 2028, which is why the debt brake for defense spending has been relaxed.

What role does the sectoral exemption for defense spending play?

The amendment to the Basic Law created an exemption for defense spending exceeding one percent of gross domestic product. This regulation allows defense spending exceeding one percent of GDP to be financed by loans without these loans being counted against the debt brake's permissible limits.

According to the Federal Ministry of Finance, €97.4 billion will fall under the sectoral exemption in 2026. Subtracting one percent of the nominal GDP of the year preceding the budget, amounting to €43.1 billion, results in €54.3 billion in disregarded borrowing. This demonstrates the substantial financial volume made possible by this exemption.

What does this mean for the NATO objective?

The German government plans to increase its NATO spending to 3.5 percent of its gross domestic product by 2029. This is an ambitious goal that will require considerable financial resources. The key figures for the coming years indicate that budget line 14 will rise to €82.69 billion in 2026, €93.35 billion in 2027, €136.48 billion in 2028, and €152.83 billion in 2029.

Germany is thus reaffirming its commitment to its responsibility within NATO and to a strong European security and defense policy. Defense Minister Pistorius emphasized that Germany is sending a clear signal to its alliance partners: “Germany can be relied upon.”

What relief measures are planned for citizens?

In addition to massive investments, the 2026 draft budget also includes tax relief for citizens. The commuter allowance is to be increased to 38 cents per kilometer to create greater fairness between urban and rural areas. The Germany Ticket will continue to provide simple and affordable mobility for millions of citizens.

A reduction in VAT from 19 to 7 percent is planned for the hospitality sector, which is intended to help stabilize prices. Energy price relief is planned through reductions in network charges, the abolition of the gas storage levy, and a reduction in the electricity tax for the manufacturing sector. Nearly €10 billion is earmarked for energy cost relief for citizens and businesses next year.

How will Ukraine continue to be supported?

Germany continues to stand firmly by Ukraine, as the draft budget clearly demonstrates. Approximately €8.5 billion in military aid for Ukraine is earmarked for 2026. These funds are allocated in budget line 60 for the General Financial Administration. Support for Ukraine, both military and civilian, will also be guaranteed in future budgets.

The continued support for Ukraine underscores the German government's stance on Russian aggression and its commitment to defending the European peace order. These expenditures are part of a broader security policy orientation reflected throughout the defense budget.

What are the political reactions to the draft budget?

Reactions to the 2026 draft budget are predictably mixed. Members of the coalition have praised the growth incentives and massive investments. Federal Finance Minister Klingbeil described the budget as a "milestone for achieving more growth and fairness in our country at record speed.".

The opposition, however, warns against naivety and rising prices. Critics speak of the “principle of hope” and a “big gamble” in light of the high debt and the funding gaps in the coming years. The Federation of Taxpayers warns the government against taking on massive debt.

The budget negotiations in the coming months will reveal what changes parliamentarians will make to the government's draft. It is certain that the members of parliament will make further modifications before the budget is passed at the end of November 2025.

Markus Becker

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