A primary deficit exceeding the debt-stabilising levelGermany’s primary deficit is expected to widen significantly in 2026 and 2027, driven by rising infrastructure and defence spending, made possible by the relaxation of fiscal rules. The primary balance will continue to exceed the debt-stabilising level in the coming years, despite a gradual reduction in the deficit from 2028 onwards.
Given the gradual rise in the implicit interest rate on debt over the forecast horizon, the improvement in the primary balance will need to accelerate to allow debt to stabilise.
An unfavourable interest rate-growth differential from 2030 onwardsHaving benefited from nominal growth that was significantly higher than the apparent interest rate on its debt, Germany is expected to see this situation reverse from 2030 onwards.
The apparent interest rate is projected to rise from 1.93% in 2026 to 3.16% in 2032, driven by the gradual refinancing of debt on less favourable terms. At the same time, nominal growth is expected to slow, falling from 4.2% in 2026 to 2.8% in 2032 due to a slowdown in real growth (from 1.3% in 2026 to 0.7% in 2032). Consequently, the interest-growth differential would gradually become unfavourable, contributing to a sharper rise in the public debt ratio towards the end of the period.
