Germany is going all in. The government plans to inject an additional €500 billion in debt into the economy over the coming years, on top of existing liabilities. The so-called “Special Fund for Infrastructure and Climate Neutrality,” a debt program disguised under a special fund, is now hitting the ground.
Under this cumbersome working title, Germany aims to catapult itself out of the ongoing slump with fresh borrowing and state-driven demand. This package, exempted from the debt brake by a constitutional amendment in March 2025, is designed to enable investments in crumbling roads, rails, bridges, digitization, and climate protection.
Where does the money flow and where does it come from?
Following the government’s plans, one is reminded of socialist fine-tuning: €166 billion will flow into rail and bridge infrastructure, with €22 billion in 2025 alone earmarked to digitally upgrade the decrepit rail system. Over €100 billion are planned by 2029. Another €100 billion will feed the Climate and Transformation Fund, including hydrogen dreams, “green” mobility, and industrial restructuring — all unfolding like dough in recent months.
Education and social sectors get €6.5 billion for daycare centers and digital curricula; housing programs will be boosted by €11.25 billion through 2029. For research and digitization, a whopping €17.1 billion is reserved for 2026. Will Germany finally close its broadband gaps and leave third-world digital infrastructure behind? States and municipalities receive modest funding — only about €790 million for urban development in 2025. That’s the central plan. Now comes distribution.
What actually reaches the targeted sectors remains to be seen. Germany’s debt crisis increasingly reveals itself in growing deficits in social welfare funds, which command absolute priority in Berlin. Social peace in the citizen’s income paradise doesn’t come free! Despite skepticism, fresh credit will find its way into the intended channels — the sheer size of the debt package makes that possible.
Stress test on the bond market
When it comes to new debt, remarkable consensus reigns in the usually fractious government coalition. Parliamentary processes roll smoothly. On June 24, 2025, the cabinet approved the package with funding secured until 2036. In 2025 alone, €27.2 billion will expand federal activity. Annual spending will approach €120 billion by 2029.
The debt binge is financed solely by borrowing: new loans via federal bonds. Experts warn of rising interest costs — 2025’s budget includes expenditures of €503 billion, of which €143 billion is credit-financed. At current market yields of 2–3 percent on long-term bonds, additional interest costs on the growing debt quickly add up to billions — a mortgage future budgets will bear, eventually passed on to taxpayers as taxes and inflation.
The implications for the European bond market, largely anchored on Germany’s creditworthiness, are significant. Regardless of credit ratings, investors have been increasingly shying away from long-dated bonds. This global phenomenon is expected to accelerate in Europe if Germany floods capital markets with massive bond issues, while investors realize Europe’s largest economy is stuck in a deep structural crisis.
Banks smell profits
One sector already rubbing its hands: German banks. A recent Handelsblatt survey among leading lenders finds most expect a strong rise in corporate credit demand. Commerzbank forecasts a 35% increase in corporate loans by 2029, from €104 billion to €140 billion annually. Investments in factory sites, working capital, and capacity expansions are on many companies’ agendas amid government stimulus, opening lucrative credit business opportunities.
Of course, politically favored sectors benefit from this temporary boom. Think of the subsidized enterprises already hooked on state funds and green transformation projects. Subsidies stack on subsidies — Germany’s economic decline is being cemented this way.
The credit boom for banks is temporary. Generally, government-subsidized business models are unprofitable and end with state support. Implicitly, taxpayers finance the next banking crisis as bad loans accumulate on banks’ books.
State economists like DIW President Marcel Fratzscher pin hopes on strong economic impulses. They forecast 1% nominal GDP growth in 2026, and over 2% annually from 2027. Adjusted for inflation and declining productivity, the debt package is likely to substantially worsen Germany’s economic outlook.
Dramatic consequences
The oversized debt orgy the government has unleashed now hits like a tsunami — first slowly, then accelerating. Neither Germany nor Europe has experience with such a concentrated, voluminous state credit program. Economically, it will severely disrupt capital, commodity, and currency markets. Substantial productivity losses are inevitable — the virus of artificially printed poverty spreads.
The loud dissonance between real economy and ideology-driven central planning will, after a brief blaze, collapse into a severe economic depression. Credit for the private sector, operating in free markets, will become artificially expensive; access to raw materials restricted; and personnel tied up in unproductive sectors, worsening Germany’s inefficiency.
With this special fund, Germany stumbles in Keynesian zealotry into a historic debt trap. To quote Milei’s Argentina: in months, they cut their state share by about six percent, freed capital from state control, and sparked 7.7% growth.
Intellectually bankrupt
What’s terrifying about German politics is its blatant ignorance of economic reality. They cling to failed economic policies, doubling down and wondering why outcomes deteriorate.
Every euro allocated via free markets to efficient projects would benefit society, not end up in the clutches of bureaucracy and subsidy entrepreneurs.
If the Merz government’s debt path continues unchecked, Germany’s state share will surpass 60%, private sector will be mired in depression, and social crises will reach uncontrollable levels.
Deliberately pushing a nation into debt crisis is political madness. It’s ethically reprehensible and demands urgent correction.
Let’s hope bond markets show the red card before the flood of German debt hits.
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Thomas Kolbe, born in 1978 in Neuss/ Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination. Follow him on Twitter/X: https://x.com/ThomKolbe.