Germany’s general government deficit widened to €71.3 billion in the first half of 2025, up €36.6 billion from a year earlier, breaching the EU’s 3% of GDP fiscal limit, the Federal Statistical Office reported on Tuesday.
The deficit equated to 3.1% of gross domestic product, exceeding the Maastricht criterion’s ceiling of 3% for the first time in the current cycle. The federal government accounted for the bulk of the shortfall, with a financing deficit of €48.1 billion—an increase of €29.0 billion year-on-year—primarily due to higher defense outlays and additional investments and subsidies financed through special funds.
Tax revenues rose at a moderate pace, while state and local governments posted mixed results: Länder deficits expanded by €3.5 billion to €6.5 billion, municipalities trimmed their shortfall by €1.5 billion to €14.8 billion, and the social security system swung to a €1.8 billion deficit from a €3.8 billion surplus a year ago, driven by rising expenditures in health and long-term care insurance.
The surge in borrowing costs has intensified scrutiny of Germany’s debt trajectory. Ten-year Bund yields reached roughly 3.3% last week, the highest level in more than 15 years, raising the cost of new issuance and constraining fiscal flexibility for investment and social spending. Interest payments climbed 11.6% to €27.3 billion in the first half, underscoring the compounding burden of elevated debt servicing.
Jens Boysen-Hogrefe, a tax expert at the Kiel Institute for the World Economy, noted that the combination of rising deficits and higher borrowing costs signals the need for urgent fiscal consolidation. "The significantly increased interest expenses indicate that the widening deficits cannot be dismissed," he said. "There is strong pressure to align future budgets with constitutional requirements and ensure medium- to long-term sustainability amid rising debt servicing costs and demographic pressures."
Clemens Fuest, president of the Ifo Institute, urged the government to adopt a multi-year strategy to reduce expenditures and bolster growth without undermining productive investment. "The rise in sovereign bond yields reflects growing concern over rising debt and the risk of higher inflation," Fuest told Reuters. "Germany needs a credible plan to restore confidence in public finances and lower borrowing costs."
