Enhancing Financial Support Proposed for Hessen by DGB
In the heart of Germany, the drafting of the state budget for 2026 is underway, with a unique blend of austerity measures and investment strategies aimed at addressing economic challenges and promoting growth. The chairman of DGB Hesse-Thuringia, Rudolph, has been a vocal advocate for this balanced approach, particularly in light of the significant investment backlog at the state and municipal levels.
Rudolph has emphasised the importance of addressing the investment backlog while also fostering economic growth and job creation. In response, Finance Minister Lorz (CDU) has announced austerity measures for the 2026 budget, primarily focusing on social welfare spending cuts and stricter benefit sanctions.
One of the key austerity-related measures includes cuts in the national social welfare budget (Bürgergeld), with the federal government planning to reduce social welfare expenditures by €1.5 billion in 2026 and an additional €3 billion in 2027. This move is part of a broader recalibration of spending within this program, which had a total allocation of €42.6 billion in the current year.
However, contrary to classic austerity with broad cuts, the 2026 budget actually plans to increase public investment. The push aims to address the massive investment backlog and stimulate economic growth, with total spending of approximately €503 billion and record investment earmarked at €115 billion (around 22.8% of total spending).
Rudolph, expressing concerns about the potential impact of the proposed austerity measures on the economy, has proposed an alternative strategy for the 2026 budget. This strategy emphasises investment in job creation and economic stimulus, with a focus on sectors like education, healthcare, and green energy projects.
The chairman of DGB Hesse-Thuringia has requested a meeting with Finance Minister Lorz to discuss the proposed budget and its potential impact on the economy. As of now, the state government is yet to respond to this request.
Strict fiscal oversight is another key aspect of the 2026 budget, with Finance Minister Lars Klingbeil emphasising stringent oversight to guarantee that every euro spent is well utilised, balancing the increased investments with fiscal responsibility.
Despite the focus on investment, the government plans a significant increase in public debt (€82 billion in 2026), moving away from previous austerity norms. The government views this as sustainable, given Germany's relatively low debt-to-GDP ratio (~63%) compared to other countries, and necessary to finance growth and investments.
In summary, the 2026 German budget combines austerity in social welfare spending with a strong emphasis on public investment and growth financing, reflecting a nuanced approach to economic challenges rather than sweeping austerity. The debate continues as Rudolph advocates for a reduction in the investment backlog and a focus on job creation and economic stimulus, while Finance Minister Lorz moves forward with the announced austerity measures.
Rudolph advocates for an economic strategy that focuses on reducing the investment backlog, fostering job creation, and promoting economic stimulus, particularly in sectors like education, healthcare, and green energy projects. The new 2026 budget, however, plans to combine austerity measures, such as cuts in the national social welfare budget, with a significant increase in public investment, particularly in infrastructure, to stimulate economic growth.
