Germany’s budget for 2025: A massive and rapid increase in investment, but for what purpose and at what cost?

BNP Paribas Team BNP Paribas

The German government has presented its draft budget for 2025, which is expected to be adopted in September. It is a breakaway budget marked by a clear return to public investment and support for business investment, at the cost of a significant increase in debt. This budget is one of the pillars of Germany's new policy, which should have a rapid positive impact on growth.

The German government presented its budget for 2025
On Tuesday 24 June, the German government presented the main outlines of its budget for 2025 and its projections until 2029.

A bill to implement the borrowing authorisations for the EUR 500 billion special fund for infrastructure and low-carbon transition was also tabled. The text has been sent to Parliament for review and possible amendments before the summer recess, ahead of a vote scheduled for September. The budget is not expected to encounter any major obstacles. Indeed, the vote only requires a simple majority, and the CDU/CSU and its coalition partner, the SPD, constitute a majority.

The government intends to modernise the country and return to a potential growth of at least 1% as quickly as possible. To achieve this, it is banking on targeted public investment in strategic sectors, structural reforms and tax incentives to stimulate private investment (see the ‘Investitionssofortprogramm’ law adopted on 26 June 2025).

The 2025 draft budget structures the public investment strategy and organizes a ramp-up of this spending:

- Starting in 2025, Germany plans to invest around EUR 120 billion per year in public infrastructure (2.7% of 2024 reference GDP). Funding will prioritise transport (particularly rail) and housing, but also digital technology, education and the energy transition.

- A steady increase in defence spending is planned, reaching 3.5% of GDP in 2029 (an average of EUR 160 billion per year); the ramp-up will be rapid (2.4% of GDP in 2025, 3% in 2027).

- This unprecedented increase in public investment will be enabled by special dedicated funds, but also by the requirement to allocate at least 10% of the core budget to investment spending. By way of comparison, the latter accounted for only 2.7% of total federal public spending on average over the period 2000-2020.

Download the Full Report!

Author

BNP Paribas Team

BNP Paribas

BNP Paribas Economic Research Department is a worldwide function, part of Corporate and Investment Banking, at the service of both the Bank and its customers.

AUD/USD falls to near 0.7100 after slipping below 50-day EMA

AUD/USD depreciates after registering minor gains in the previous day, trading around 0.7120 during the Asian hours. The technical analysis of the daily chart shows the pair consolidating sideways within a rectangle pattern, as neither bulls nor bears gain control. The AUD/USD pair is holding a slight bearish tone however as it sits beneath both the nine-day and 50-day EMAs.

160.00: USD/JPY back near intervention territory after upbeat US jobs report

US Nonfarm Payrolls beat expectations by a wide margin in May, with 172K jobs added. The US Dollar rebounds after the release, helping USD/JPY recover from its intraday lows. Warnings from Japanese authorities continue to limit upside potential near the 160.00 threshold.

Gold targets $4,300 amid stronger Dollar

Gold faces increasing selling interest and navigates the area of three-month lows near the $4,300 mark per troy ounce on Friday. The precious metal’s decline comes as traders assess the stronger-than-expected NFP, while the bid bias in the Greenback and higher US Treasury yields also collaborate with the retracement.

Cardano hits five-year low even as Hoskinson clarifies "break" isn't an exit

Cardano (ADA) price is down 10% at press time on Friday, extending losses over 30% so far this week amid Charles Hoskinson's clarification that "break" isn't an exit.

Week ahead – Fed countdown begins amid US inflation data and geopolitical risks

Fed Chair Warsh’s first meeting approaches as key US inflation data could reshape expectations. Oil prices remain elevated as US-Iran talks continue; tariffs also return to the spotlight. ECB is expected to hike; will it be a one-off move or is July live?

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.