Germany Federal Spending Above Expectations in August

Economics Research 22 September 2026 | 9:27AM CEST

Germany: Federal Spending Above Expectations in August

BOTTOM LINE: German federal expenditures in August came in at EUR 50.0bn, Niklas Garnadt | above our EUR 45.7bn forecast, and EUR 7.1bn higher than in August 2025. Goldman Sachs Bank Europe SE Spending in the main budget and the military fund were above our expectations, while spending in the infrastructure and climate fund was in line with our forecast. With revenues slightly below our expectations, the fiscal balance was about EUR 5.1bn (0.1% of annual GDP) wider than we expected. The fiscal data since the start of the year support our view of a notable fiscal expansion in 2026, which we expect to provide a fiscal impulse of around 0.7pp (recently upgraded from 0.6pp).

Expenditures in the Main Budget (August): EUR 44.7bn (vs. GS expected EUR 40.9bn and 2025 Realized EUR 41.9bn)

Expenditures (implied) in the Military Fund (August): EUR 2.2bn (vs. GS expected EUR 1.5bn and 2025 Realized EUR 1.0bn)

Expenditures (implied) in the Infrastructure and Climate Fund (August): EUR 3.1bn (vs. GS expected EUR 3.3bn and 2025 Realized EUR 0bn)

1. German federal spending in August was above our expectations. Overall spending across the main budget and the off-budget funds for military and infrastructure & climate came in at EUR 50.0bn, above our expectation of EUR 45.7bn and EUR 7.1bn higher than spending in August 2025.

2. Spending stood at EUR 44.7bn in the main budget in August, about EUR 3.8bn above our expectation and EUR 2.8bn above August last year. The upside surprise was driven by substantially higher interest payments while social spending and defence expenditures were slightly lower than we expected.

3. Spending in the off-budget military fund (implied by the fund’s issuance activity) stood at EUR 2.2bn, above our expectations and notably higher than last year’s EUR 1.0bn. YTD spending in the military fund is up EUR 4.1bn (+50%) from last year and total defence spending is up EUR 13.5bn (+32%). That said, defence spending continues to track about 10% below our projection, and is at risk of falling significantly short of the full-year target, although the strong seasonality of defence spending, which typically sees a strong pick-up in Q4, leaves our expectations still attainable.

4. Spending in the infrastructure fund (implied by the fund’s issuance activity) came in at EUR 3.1bn, slightly below our forecast of EUR 3.3bn. Data from the Ministry of

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Finance suggest spending of EUR 2.4bn on federal programmes and EUR 0.4bn on state level programmes, and thus imply EUR 0.3bn spending on the climate transformation fund. As the infrastructure & climate fund was only established last autumn, there are no comparable numbers for last year, but total spending out of this fund remains notably higher than the decrease in infrastructure-related items in the main budget compared to last year.

5. As revenues in the main budget came in slightly below our projections, the fiscal deficit in the main budget was wider than we expected at EUR -15.7bn (vs. EUR -11.1bn). Net issuance in the military fund stood at EUR 2.2bn and in the infrastructure & climate fund at EUR 3.1bn, adding up to a total fiscal deficit of EUR -21.0bn in August (vs. EUR -15.9bn expected). The cumulative fiscal deficit through August stood at EUR -111.2bn, EUR 19.7bn (0.4% of GDP) wider than we anticipated at the start of the year and EUR 57.3bn (1.2% of GDP) wider than in August last year.

6. The fiscal data since the start of the year continue to support our view of a notable fiscal expansion in 2026, which we expect to provide a fiscal impulse of around 0.7pp (recently upgraded from 0.6pp).1 Owing to a notably larger fiscal deficit year-to-date than we expected, we upgraded our deficit projection by 0.2pp to 4.0% compared to the beginning of the year.

Exhibit 1: Federal Spending in August was Above Our Expectations

For the fully debt-financed military and climate & transformation off-budget…