German Chancellor Friedrich Merz
As reported by the AFP agency AFP
In 2025, Germany’s budget deficit could exceed 3%, but a penalty for such a deviation will not be applied, as the main reason is increased defense spending.
Under EU budget rules, debt should not exceed 60% of GDP, and the deficit should be no more than 3%. This year, Brussels allowed countries to spend up to 1.5% of GDP on defense over four years. Germany was among the 16 countries that filed for an exemption from the excess penalty.
Berlin usually adheres to budgetary discipline, but in light of the growing threat from Russia, the country shifted its spending stance, increasing defense and infrastructure funding in order to revive the euro area’s traditional engine of economic growth after two years of recession.
Chancellor of Germany Friedrich Merz this year loosened the strict debt repayment rules and implemented extensive cuts to infrastructure and defense spending.
Projected deficit and the EU’s response
The European Commission forecasts that Germany’s deficit this year will be around 3.1% of GDP, citing rising costs as the reason.
Although Berlin avoided criticism, Brussels said it would officially propose starting an excessive deficit procedure against Finland, whose deficit also exceeds the norm and is partly explained by increased defense spending. The EU has already initiated similar procedures against Austria, Belgium, France, Hungary, Italy, Malta, Poland, Romania and Slovakia.
In summary, the EU continues to apply its financial monitoring mechanisms to various countries, and Germany remains on a course to increase defense spending in response to the geopolitical situation.
