Germany’s debt forecast to rise sharply as spending surges on defence, infrastructure

Germany’s public debt is projected to climb from 62.5% to 74% of GDP by 2030, driven by record defence and infrastructure spending, according to a report by the European rating agency Scope.

The report highlights the long-term fiscal impact of Berlin’s shift away from its traditional austerity stance. In March, the German parliament approved sweeping spending plans, including a €500 billion ($584 billion) infrastructure fund and a significant boost to defence expenditure.

Scope analyst Julian Zimmermann warned that growing outlays on interest payments, pensions, and healthcare would erode fiscal flexibility. “Despite rising borrowing, the pressure to consolidate the government’s core budget will increase over time,” he said.

According to Scope, the share of freely available funds in the federal budget could plummet from 24% to just 3% by 2035 unless structural reforms in areas such as pensions and the labour market are implemented.

While the infrastructure fund could lift Germany’s long-term growth potential from 0.7% to 1%, the economic stimulus from defence spending will be more limited.

For every euro invested in defence, only 50 cents is expected to directly benefit the domestic economy, the report noted.

Copied