Germany's draft 2027 budget, seen by Reuters on July 4, plans borrowing of more than €203 billion (~$232 billion) — up from just €50.5 billion in 2024 — as Berlin ramps up defence spending to €109 billion and infrastructure investment to fund its struggling economy amid Middle East energy shocks.
Four years ago, Germany borrowed €50.5 billion. Next year, it plans to borrow €203 billion. That's a 4x jump in debt issuance in a single parliament. Every CFO I know would stop at that number and ask one question: what does this do to the interest burden?
Germany's own finance ministry projects interest expenses climbing to €66.5 billion by 2029. That's money that buys nothing — no roads, no tanks, no chips. It just services yesterday's decisions. In corporate finance, we call this the cost of debt, and it feeds directly into WACC — Weighted Average Cost of Capital. WACC is the blended cost of funding a business (or a country) using both equity and debt. As you pile on more debt, your lenders demand higher yields to compensate for the risk, and your WACC rises.
Now here's the CFO's real question: is the return on these investments higher than the cost of borrowing? Germany is betting yes — defence and infrastructure should eventually lift GDP and tax revenues above the interest bill. That's exactly the NPV logic behind every capex decision: borrow only if the project's return clears your cost of capital.
The lesson for founders: debt is not free money. Every rupee or euro borrowed has a price tag attached. Model your interest coverage ratio — EBIT divided by interest expense — before you sign the term sheet. Germany forgot this rule for 20 years. Now it's relearning it at €203 billion a year.
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