Economists: Germany risks serious budget crisis from 2028 if spending isn't tightened

Leading German economists warn that Germany could face a serious budgetary crisis starting in 2028 unless the government tightens spending and establishes clear priorities for public funds.

Clemens Fuest, president of the Munich-based ifo Institute, told policymakers that the current fiscal path is unsustainable over the long term and that the governing coalition must decide which areas will be prioritised in the 2028 budget. He singled out defence and infrastructure as the main priorities and suggested freezing or cutting other expenditures; without such measures, he said, "a tax increase will be inevitable."

Large planned spending for 2027 raises pressure

The warnings come as Germany prepares unusually large budgetary outlays. The Bundestag's budget committee approved the proposed 2027 budget after almost 16 hours of negotiations, setting basic-budget spending at €561 billion. Net borrowing in the basic budget alone is planned at roughly €123 billion, while additional billions will be raised through special funds, bringing the total new borrowing to an estimated €210 billion.

Achim Wambach, president of the Leibniz Centre for European Economic Research (ZEW), expressed similar concern. He warned that from 2028 the fiscal situation may be more severe than what a simple recovery forecast suggests, noting that current interest rates exceed the economy's growth rate — meaning Germany cannot rely on growth alone to reduce public debt.

Wambach argued that reform of the social-protection system must become a top priority and called for an immediate reassessment of public spending. He recommended cutting subsidies that do not support economic growth as part of a broader consolidation effort.

Both economists say the government faces a choice: tighten and reprioritise spending now or prepare for tax increases and more painful adjustments later.

Photo: press material from the event