Germany's coalition government presented its 2026 draft budget to parliament, proposing 174.3 billion euros ($204 billion) in borrowing (over three times the 2024 level), a record 126.7 billion euros in investment spending (10% higher than 2025 following an already sharp increase this year), and around 117.2 billion euros in defense spending including special funds, equal to roughly 2.8% of GDP, Reuters reported on Sept. 23. Support for Ukraine is set at 8.5 billion euros.

Plans for record borrowing in the 2026 budget are enabled by constitutional amendments to Germany's traditionally strict fiscal rules approved in March. The change was passed through a cross-party agreement between the Social Democratic and Green parties, then part of the outgoing government, and Merz's Christian Democratic Union, which won February's general election and was at the time in the opposition. Without the reform, Germany's "debt brake" limiting new borrowing to 0.35% of GDP would have capped 2026 borrowing at about 35.5 billion euros. Lawmakers also agreed to suspend the cap for defense and national security spending and established a 500 billion euro special fund for infrastructure and climate projects. Parliamentary debate on the proposals began right after the presentation of the draft budget on Sept. 23. Deliberations are expected to run until mid-November. The Bundestag is set to vote on the final budget law on Nov. 28.