Germany's €20B Budget Crisis Sparks Proposals for Massive Staff and Subsidy Cuts
The 2027 federal budget faces a shortfall of over €20 billion, with projected deficits exceeding €60 billion in the following years. "We cannot fund the upcoming tax reform through accounting tricks alone. Genuine and substantial savings are essential," Friedrich Merz's deputy, Carsten Middelberg, told the Neue Osnabrücker Zeitung (NOZ).
He proposed not only cutting eight percent of staff in government ministries—as agreed in the coalition treaty—but also extending these reductions to all federally funded institutions. "If we are rightly reducing personnel by eight percent at the top levels of federal administration during this legislative term, then the same must apply to all entities receiving federal support," Middelberg argued. The federal government funds "a vast number of institutes, foundations, and centers for all manner of topics," he noted. "Some of these initiatives have long outlived their purpose, while others fall outside federal responsibility. Yet no one dares to dissolve them. At the very least, the scale of funding must now be drastically reduced."
Middelberg also sees significant potential for cuts in subsidies, which have surged from €8.3 billion to €59.5 billion in just seven years—a more than 600 percent increase. These financial aid measures cover climate protection, decarbonizing transport and buildings, scaling up hydrogen infrastructure, and social housing. "Most of these subsidies are fundamentally worthwhile," he acknowledged. "But there is too little scrutiny of whether these funds actually achieve their goals—and whether the same results could be delivered just as effectively, or even more so, with fewer resources." A gradual reduction in subsidy rates and volumes would "not be a loss," Middelberg contended, but could instead "foster competition for more efficient solutions."
Federal Finance Minister Lars Klingbeil (SPD) is set to finalize the key parameters for the 2027 budget in the cabinet on Wednesday. The draft will then enter parliamentary deliberations, with the Bundestag making the final decision on 2027 spending in November.
