Merz cabinet approved Germany's draft budget for current year and medium-term financial plan

The Cabinet of German Chancellor Friedrich Merz has approved the budget for 2025 and medium-term financial plan. According to the documents, a substantial increase in government borrowing is expected in order to build up the country's military capabilities.

Germany's budget for the current year includes a net new debt amounting to 82 billion euros ($95 billion). According to the government's plan, it will be increased gradually to just above 126 billion euros (almost 146 billion dollars) by 2029. Over the five years to 2029, net new borrowing will reach approximately 500 billion euros (about $580 billion).

The increase in defense spending will help Germany meet the NATO alliance's new goal of allocating at least 3.5% of GDP to the military. Now this value stands at 2%.

The government's next step involves sending the budget plans to the country's parliament for approval by lawmakers in both houses. The upper house should give a final assessment of the projects at the end of September.