Government Audit Entity: Federal Republic of Germany
The Federal Audit Office has released a report on the draft budget for 2026, prepared by Finance Minister Lars Klingbeil, and it paints a concerning picture of the federal government's financial health.
According to the report, the federal government's spending habits are unsustainable, with rising expenditures not being matched by an equally growing capacity to perform. This structural issue, the report suggests, points to the federal government living beyond its means.
The report further highlights a potential long-term financial instability for the federal government, due to the high levels of planned new debts. The draft budget proposes expenditures of around 520 billion euros, with approximately 174 billion euros in new debts. An additional 84 billion euros in loans from special funds are planned, and in the core budget alone, debts of almost 90 billion euros are planned for 2026.
The Federal Audit Office criticises almost every third euro in the 2026 budget being planned to be financed on credit, which they deem as a sign of an unstable financial economy. They warn of a potential debt spiral due to the high levels of new debts planned for 2026.
The report also indicates that state core tasks cannot be permanently financed from revenues, and taking on new debts is only a short-term solution that reduces reform pressure. The Federal Audit Office warns that a significant portion of the 2026 federal budget will be tied up for interest payments in the medium term.
In a stark warning, the Federal Audit Office has accused Finance Minister Lars Klingbeil of driving the federal government into a debt spiral. The organisation's assessment suggests that the 2026 budget, as proposed, is not financially sustainable, and the federal government is not financially sustainable as it stands.
Finance Minister Lars Klingbeil plans to submit the 2026 budget to the Bundestag next week. It remains to be seen how the government will address these concerns and ensure the financial stability of the federal government in the years to come.
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