Germany Closed 2025 with a Record Budget Deficit 0 11

Germany's consolidated state budget ended 2025 with the largest deficit since the start of the war in Ukraine during the energy crisis of 2022, the Federal Statistical Office in Wiesbaden reported on Tuesday, April 7. The deficit reached €127.3 billion, which is €22.9 billion more than the previous year. Total revenues amounted to approximately €2.081 trillion, while expenditures were around €2.208 trillion.

The main culprit for the increase in the deficit was the federal government: its shortfall increased by €34.5 billion, reaching €85.4 billion. The reason was the reliance on debt financing - through special funds for the Bundeswehr, infrastructure, and climate protection, all fully funded by loans.

Municipalities recorded a record deficit of €31.9 billion: expenditures rose by 5.6 percent, while revenues increased by only 4.1 percent.

Federal States and Social Funds Reduced Losses

The federal states and the social security system managed to reduce their deficits. The shortfall of the states decreased by €9.5 billion to €8.7 billion, with three-quarters of this amount attributed to the city-states of Berlin, Hamburg, and Bremen, while five states, including Bavaria and Hesse, recorded budget surpluses.

The deficit of the social security system decreased by €9.2 billion to €1.3 billion, due to a 9 percent increase in insurance contributions, including an increase in additional contributions to the health insurance fund.

The increase in federal expenditures was due to higher subsidies and loans for social funds. The federation allocated €5.3 billion to Deutsche Bahn for capital increase and provided a loan of €3 billion. A key factor in the rise in expenditures was military procurement - which increased by 23.4 percent to €39 billion. Changes in the accounting practices for government securities allowed for a reduction in interest expenses compared to 2024.