German: Public investments in 2025 fell 25% short of target

Danske Research Team Danske Bank A/S

Germany delivered a historical shift to its fiscal policy last year with a change to the “debt brake” and a EUR 500 bn infrastructure package. With the funding in place focus is now on the implementation of the stimulus measures, which will be key for the economic outlook, the ECB, and most European financial markets. In this publication series we will provide regularly updates on the German fiscal expansion drawing on monthly data on public investments and defence spending.

The German Federal Ministry of Finance have just revealed the preliminary results of the federal budget for 2025. The public deficit was 2.4% of GDP with expenditures totalling EUR 493 bn, slightly below the target of EUR 503 bn.

Total public investments amounted to EUR 86.8 bn in 2025 which was 17% higher than in 2024 but at the same time 25% below the targeted EUR 115.6 bn.

Defence expenditures amounted to EUR 87.0 bn in 2025 which was 18% more than in 2024 but 7% short of the EUR 94.0 bn target.

The failure to reach the targets is a slightly dovish signal for the ECB but not enough to cause a rate cut in 2026 as there is still a large increase in spending. At the same time the undershooting of the targets supports our view of no hikes in 2027. The 2025 public investment target was very ambitions as funding was only available from the final quarter of the year. Moreover, Germany has implemented three new laws to quicken the bureaucratic process, so we expect 2026 to deliver further rises.

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Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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