German Public Deficit Hits 98.8 Billion Euros in First Half as Interest Bill Rises 21.2 Percent
Germany’s public sector ran a financing deficit of 98.8 billion euros in the first half of 2026, the Federal Statistical Office said on 2 October, as spending rose about 6 percent to 1,110.6 billion euros while revenue grew about 2 percent to 1,011.8 billion. Every level of government closed the half in deficit, and the federal government accounted for 72.3 billion euros of the total, or 73 percent on our calculation.
The federal shortfall more than doubled
Federal spending rose 9.8 percent to 325.5 billion euros while revenue fell 5.0 percent to 253.1 billion, its steepest first half fall since 2020, when it dropped 6.2 percent. The federal deficit rose to 72.3 billion euros from 30.0 billion a year earlier. On our calculation, federal revenue covered 77.8 percent of federal spending, against about 89.9 percent in the first half of 2025.
Federal tax revenue fell 3.1 percent. Two relief measures, a lower electricity tax for manufacturing and agriculture from 1 January and a cut in the energy tax on motor fuels in May and June, together with a slump in tobacco tax receipts after the tax was raised on 1 January, cut federal receipts by about 3.3 billion euros against the same period a year earlier.
German public sector finances by level, first half 2026
| Level | Revenue | Spending | Balance |
|---|---|---|---|
| Federal government | 253.1 | 325.5 | -72.3 |
| Municipalities | 184.0 | 204.1 | -20.1 |
| Federal states | 284.3 | 290.6 | -6.3 |
| Social security | 491.3 | 491.4 | -0.1 |
Billion euros, provisional cash results for core and extra budgets. Balances are as reported and may differ from revenue less spending by rounding; the levels’ revenue and spending do not add to the overall 1,011.8 billion and 1,110.6 billion. Social security revenue includes 10.2 billion euros of federal loans.
Interest outpaces investment
Interest spending across the public sector rose 21.2 percent to 31.2 billion euros, while fixed investment was flat at 43.1 billion. On our calculation, interest now equals 72 percent of what the public sector spends on construction and fixed assets, and 2.8 percent of all spending. Investment rose 4.6 percent at the federal level and 3.1 percent in the states but fell 4.5 percent in the municipalities.
The municipal deficit stayed at 20.1 billion euros, the same record level as a year earlier, the largest for any first half since reunification in 1990. Among the states, Bavaria, Saxony, Schleswig-Holstein and Thuringia ran surpluses. Social security came close to balance, with a deficit of 68 million euros, supported by the federal loans to the Federal Employment Agency, 6.3 billion euros, the health fund, 2.3 billion, and long-term care insurance, 1.6 billion. Health and unemployment insurance were in surplus, while pension and long-term care insurance were in deficit.
Why it matters: The federal budget is carrying the cost of energy relief through lower tax revenue at the same time as public sector interest spending climbs, and the federal deficit has more than doubled in a year. These cash figures differ from the national accounts measure used for the EU deficit rules.
Outlook: The second half figures will show whether federal tax revenue recovers and whether public sector interest spending keeps outpacing investment.
Sources: Federal Statistical Office of Germany, The Edge.
