Audit Court: Federal Republic of Germany's Administration
Federal Court of Auditors Warns of Unsustainable Spending and Debt Spiral
The Federal Court of Auditors has issued a stark warning about the financial sustainability of the German federal government, suggesting that its current spending habits are unsustainable and may lead to a debt spiral.
In a report on the 2026 budget draft, the Court has accused Finance Minister Lars Klingbeil of driving the federal government into a debt spiral. The report states that the federal government is structurally living beyond its means, and that core state tasks cannot be permanently financed from income.
The 2026 budget draft, which Klingbeil plans to submit to the Bundestag next week, proposes expenditures of around 520 billion euros. To finance these expenses, Klingbeil plans for new loans totaling around 174 billion euros in 2026, consisting of nearly 90 billion euros in core budget debt and over 84 billion euros in special fund loans.
The risk of a debt spiral is implied in the Court's warning. In the medium term, the federal budget may have a significant portion tied up in interest payments due to new debts. The Court warns that relying on new debts is a short-term solution that reduces reform pressure.
The Court's report also states that rising federal spending is not balanced by an equivalent growth in the federal government's capacity to perform. The report indicates that the federal government is structurally overspending, and that the 2026 budget draft shows that the federal government is not able to finance core state tasks permanently from its income.
The Court's criticism extends to the plan to finance approximately one-third of the 2026 budget through credit. The budget draft indicates debts of nearly 90 billion euros in the core budget for 2026, in addition to more than 84 billion euros in loans from special funds.
The Court's warning comes at a time when the global economy is facing significant challenges, and governments around the world are grappling with how to fund their spending commitments. The Court's report on the 2026 budget draft suggests that the federal government's spending is not sustainable in its current form, and that urgent action is needed to address the structural financial imbalance in the federal government's spending and capacity to perform.
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