Germany — fiscal boost is coming

The money flows

The eventual adoption of the federal budget for 2025 at the end of September 2025 and the activation of the Special Fund for Infrastructure and Climate Neutrality (SVIK) paved the way for significantly higher federal spending. The government has obviously made use of this. Despite nine months of a “provisional budget,” federal spending, including the various “special funds” and other sub-budgets, was 30 billion or almost 6% higher last year than in the previous year, indicating extensive spending in the fourth quarter.

Expenditure is set to rise further this year. The federal budget for 2026, including various special funds, provides for additional expenditure of more than €70 billion compared with the actual figures for 2025, an increase of more than 13%. As usual, not all spending plans are likely to be implemented. Nevertheless, government spending is likely to provide a significant boost to the economy, especially since some of the spending in the fourth quarter is unlikely to have had an impact on production yet.

Some sectors are already benefiting noticeably ...

In the defense sector in particular, stronger government spending is already reflected in a significant increase in order intake. Although the Federal Statistical Office does not report figures for order intake for “military combat vehicles,” order intake in the general category “other vehicle manufacturing” has more than doubled overall, and the increases in the other subgroups were significantly lower. As a result, orders for tanks and similar vehicles are likely to have more than doubled. Orders for drones and similar vehicles are also likely to have played an important role in the increase in orders for aircraft and spacecraft.

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