The German Council of Economic Experts expects for Germany significantly more growth than in the spring. In its annual report, presented on 11 November 2026, the independent advisory body forecasts a 1.3 per cent rise in inflation-adjusted gross domestic product for 2026. In May, it had forecast 0.5 per cent. For 2027, the Council raised its forecast from 0.8 to 1.0 per cent.
According to the economic experts, the recovery is being driven above all by unexpectedly strong exports and public spending. In the Council’s view, however, the improved economic outlook does little to change the long-term problems facing public finances. In particular, higher defence and interest expenditure are putting pressure on the federal budget, while social security systems are also coming under pressure.
The Council therefore recommends limiting the increase in spending and changing how defence is funded. At present, under certain conditions, the relevant expenditure can be financed through borrowing under an exception to the debt brake . The economic experts propose gradually restricting this option from 2031. This would slow the rise in borrowing; at the same time, however, a larger share of the defence spending would have to be funded from the regular budget.
The Council’s calculations illustrate this trade-off. If the exception were used unchanged, general government debt could rise to around 98 per cent of gross domestic product by 2040. The model calculations suggest that gradually phasing out borrowing would limit the debt ratio, but widen the funding gap in the core budget. These are scenarios whose outcomes depend on the assumptions used, not inevitable developments.
The Council also sees a need for reform in the social security systems. Its proposals include changes to pensions and the removal of inefficient and environmentally harmful subsidies. According to University of Duisburg-Essen Council member Achim Truger disagrees with the majority on some of the recommendations concerning social security and long-term care insurance. He reportedly believes there is a risk that the social consequences will be given too little weight compared with the aim of lowering contribution rates.
In the Council of Economic Experts’ view, additional revenue could be needed even after spending cuts. The report also mentions a possible defence surcharge and higher taxes on sales or income. This proposal does not amount to an agreed tax increase. Any changes to taxes, social benefits and budget rules would have to be decided by the government and parliament.
The German Council of Economic Experts advises the federal government independently. Its annual report combines a short-term economic forecast with longer-term economic policy recommendations. This distinction is important when interpreting it: the higher growth forecast describes the expected performance of the economy, while the budget proposals are intended to inform political decisions. In the Council’s view, stronger growth alone will not eliminate the funding gaps it has calculated.
Editor: Daniel Mayer (Article created with AI assistance).