Germany’s Finance Minister Lars Klingbeil Pledges Major Reforms and Budget Cuts to Tackle Deficit

Germany’s Finance Minister Lars Klingbeil has announced plans for sweeping reforms and spending cuts as the government works to close a widening budget gap. In an interview with Handelsblatt published Friday, Klingbeil said the government will present “a fair overall package of savings and reforms” designed to strengthen fiscal stability.

Central to the plan will be significant adjustments to unemployment benefits, forming part of a broader reform of welfare payments. While details remain under discussion, Klingbeil emphasized that reforms would balance savings with fairness. He also noted that subsidies will be reviewed, with reductions on the table, and highlighted the potential for changes to inheritance tax policy.

The announcement comes after parliament passed Germany’s first annual budget since fiscal rules were loosened earlier this year, granting the coalition greater flexibility in addressing financial challenges. Despite these reforms, the government still faces a substantial gap of around €30 billion ($35.35 billion) in its financial plan for 2027.

Klingbeil underscored the urgency of fiscal discipline while also pointing to the importance of sustainable economic policy. “We will also discuss reducing subsidies in the coalition,” he said, stressing that reforms would not only cut costs but also modernize the welfare and taxation system.

Germany’s coalition government now faces the challenge of delivering reforms that address the budget shortfall without undermining social security and economic growth. The proposed measures signal Berlin’s intent to restore fiscal balance while adapting its welfare and tax structures to new economic realities.

By focusing on welfare reform, subsidy cuts, and potential tax changes, Klingbeil’s plan marks one of the most significant fiscal adjustments in recent years, aimed at ensuring stability in Europe’s largest economy.