The combined budget deficit of the federal government, regional and municipal authorities in Germany increased by 105% in the first half of the year compared to the same period last year, against the background of increased military spending.
“The state budget deficit in the first half of 2026, according to preliminary estimates, amounted to 71.3 billion euros. The state deficit is 36.6 billion euros higher than the previous year“, the Federal Statistical Office reported.
According to GDP, the deficit is 3.1%, 0.1 percentage points higher than the EU threshold. The federal budget accounts for the bulk of the state deficit, increasing by 29 billion euros to 48.1 billion euros. Explaining the reasons for the sharp increase in the deficit, the agency simply states that “expenditures have increased more than revenues“.
Jens Boysen-Hogrefe, an expert at the Institute for the World Economy (IfW) in Kiel, pointed to the role of defense budget items. “The decisive factor at the federal level was the excessive defense spending, as well as the additional investments and subsidies financed by a special fund“, the expert was quoted by the Handelsblatt newspaper.
Boysen-Hogrefe also noted that interest payments on already taken out state loans have increased this year. “Overall, the significantly increased loan payments show that the growing deficit cannot be ignored with a shrug“, he said.