Germany’s national debt continues to rise. As of the first quarter of 2025, the country owes €2.52 trillion — up 0.6 percent, or €14.3 billion, since the start of the year, according to the Federal Statistical Office.
This increase reflects new borrowing to finance the Infrastructure and Climate Fund, a massive programme totalling €500 billion over twelve years, as well as additional defence spending in the wake of Russia’s war against Ukraine.
Despite the growing figures, Germany still ranks among the least indebted major economies in Europe. Only France and Italy have higher total debt within the EU, but Germany’s debt-to-GDP ratio remains well below the European average.
What “national debt” actually means
National debt refers to the total amount owed by the state — both the current borrowing for the fiscal year and outstanding liabilities from previous years. Economists usually measure it as a percentage of gross domestic product (GDP), producing what is known as the debt-to-GDP ratio.
Unlike private households, governments can borrow large sums over long periods, provided their revenues remain stable and their repayment record inspires confidence. When expenditure consistently exceeds revenue and no new financing is available, a sovereign default can occur.
In practice, most countries roll over existing loans with new ones, keeping the system functioning as long as lenders trust the state’s creditworthiness. Once that trust erodes, borrowing becomes more expensive.
How governments finance themselves
The German government’s main source of funding is tax revenue, complemented by fees, social security contributions, and income from public assets. When these revenues do not cover spending needs — for example, for infrastructure, research, or defence — the state issues bonds and treasury bills.
Investors purchase these securities in exchange for interest, and Germany’s strong credit rating traditionally allows it to borrow at relatively low rates. However, when the debt ratio exceeds 90 percent of GDP, lenders tend to demand higher returns to offset perceived risks.
Countries with lower GDP and higher debt must pay significantly more in interest, which can quickly enlarge their debt mountain — a cycle many southern European states have struggled with in the past.
In Germany’s 2025 federal budget, worth €520.48 billion, interest payments and guarantees already amount to €34.08 billion. Economists warn that if rates rise further, the cost of servicing debt could erode funds for education, infrastructure, and innovation.
Interestingly, moderate inflation can help governments reduce debt in real terms, as higher prices and wages boost tax income while the real value of existing debt declines.
Debt by region: Germany’s federal states
Of the total debt, €615.4 billion comes from Germany’s 16 federal states.
North Rhine-Westphalia remains the most indebted state with €174.02 billion.
Berlin and Lower Saxony follow with €67.11 billion and €60.13 billion respectively.
At the lower end, Saxony (€6.99 billion), Mecklenburg-Western Pomerania (€7.94 billion), and the Saarland (€14.19 billion) maintain relatively healthy balances.
This gap reflects the very different tax bases and economic capacities across the German federation — industrialised western states borrow more heavily to maintain infrastructure and social services, while smaller eastern states remain more conservative.
How Germany compares in Europe
Across the European Union, total public debt reached €14.82 trillion by early 2025. France tops the list with €3.35 trillion, followed by Italy (€3.03 trillion) and Germany (€2.69 trillion, depending on methodology).
However, when measured as a share of GDP, Germany’s debt ratio is significantly lower than that of many EU partners.
- The EU average stands at 81.8 percent of GDP.
- The eurozone average is 88 percent.
- Germany’s ratio remains below both figures.
At the extremes, Greece continues to show the highest ratio at 152.5 percent, despite notable progress in recent years, while Estonia has the lowest at just 24.6 percent.
Global debt outlook: who owes the most
Worldwide, the United States holds by far the highest absolute public debt, reaching $35.25 trillion by the end of 2024 — a staggering 272 percent of GDP, according to the World Economic Database. The figure underscores a growing global trend: debt levels are rising almost everywhere, driven by pandemic-related costs, inflation relief measures, and the green-energy transition.
Germany’s debt path appears comparatively moderate — yet fiscal experts warn that sustained borrowing for defence, infrastructure, and climate programmes could limit future financial flexibility if growth slows or rates rise.
Conclusion: stability, but shrinking room to manoeuvre
Germany’s fiscal position remains strong by international standards, but the upward trend is unmistakable.
While debt helps finance critical long-term investments, the growing burden of interest payments and the proliferation of special funds raise questions about intergenerational fairness and fiscal discipline.
The country faces a familiar dilemma: how to invest enough to stay competitive — without mortgaging its future.
