Deficit reaches level of 2022 energy crisis

The total public budget in Germany recorded a financing deficit of 127.3 billion euros in 2025. According to the Federal Statistical Office, this puts the deficit back at the level of 2022, the peak of the energy crisis. In total, revenue of around 2,081 billion euros was offset by expenditure of around 2,208 billion euros. The deficit was therefore 22.9 billion euros higher than in the previous year.

What is particularly striking is that, unlike in 2022, all levels of government recorded a deficit at the same time in 2025.

Federal and local governments drive development

The deficit at federal level has widened particularly sharply. It rose by 34.5 billion euros to a total of 85.4 billion euros. The main reason for this is the significant increase in expenditure with almost stagnating income. The local authorities also recorded a significant increase: their deficit grew by 7.1 billion euros to 31.9 billion euros. This is a historic high.

In contrast, the federal states were able to reduce their deficit by 9.5 billion euros to 8.7 billion euros. Social insurance also improved slightly and recorded a comparatively small deficit of 1.3 billion euros.

Rising expenditure and political decisions

Federal expenditure rose by 6.1 % to 658 billion euros, while revenue barely increased (+0.6 %). The political decision to rely more heavily on debt financing played a key role here.

This includes credit-financed special funds for the German armed forces, infrastructure and climate protection. At the same time, additional funds were made available to stabilize social security, for example through higher subsidies for pension insurance and loans to unemployment, health and long-term care insurance.

Investments and defense spending on the rise

Military procurement, which rose by 23.4% to 39 billion euros in 2025, was also a key driver of expenditure. This is a recurring theme here at Startbase and one that we can clearly confirm with the increased number of reports from the defense sector.

Investment in infrastructure, on the other hand, developed more moderately: while the federal government (+10.5%) invested more, the federal states (+2.6%) and municipalities (+3.5%) only increased slightly.

Structural challenges remain

At the same time, the demands on the public sector continue to increase, for example due to higher social spending, investments in infrastructure and the growing financial requirements as a result of digitalization and climate change.

The current deficit therefore underlines the structural challenges for public budgets in the coming years. Further developments are likely to be exciting, as the current crisis caused by the war in Iran is not yet reflected in the figures. Financing difficulties are likely to increase for many start-up sectors, while start-ups in the field of defense tech can look forward to the increased attention.