Budget Policy between Investment Needs and Consolidation Pressures

The 2025-26 draft federal budget reflects a growing trade-off between mounting fiscal consolidation pressures and the need to safeguard key public investments, particularly in climate policy and national defence. Despite planned consolidation measures, the general government Maastricht deficit is projected to remain above 4 percent of GDP until 2026. Consolidation efforts rely primarily on expenditure reductions. At the same time, rising pension and interest expenditures continue to increasingly constrain fiscal space. Structural reforms are necessary to reconcile the objectives of fiscal sustainability and politically prioritised spending.