The budget for 2026 and more Laws went through the Federal Council today. The resolutions at a glance:
Household
The Federal Council has approved the federal budget for the coming year. The state chamber thus approved planned expenditure amounting to 524.54 billion euros. Net borrowing of almost 98 billion euros is planned, a large part of which is exempt from the debt brake.
The vast majority of the expenditure will go to 2026 pension on it, namely around 128 billion euros. The defense department experienced the largest increase, with its budget increasing by a third of percent to 82.65 billion euros.
The planned investments amount to over 128 billion euros. The money should flow primarily into the areas of transport infrastructure, education and care as well as internal and external security.
Military service
The Federal Council has decided on the new military service. From January 2026, all 18-year-olds born in 2008 or later will receive an information letter from the Bundeswehr. Men are then required to fill out a questionnaire that, among other things, asks about their interest in serving in the Bundeswehr. Completing the questionnaire is voluntary for women.
The muster will also be mandatory again for 18-year-old men. The new military service lasts between six and eleven months or longer. The federal government wants to increase the attractiveness with, among other things, a monthly gross salary of 2,600 euros and a subsidy for a driving license. The aim is to cover the Bundeswehr’s personnel requirements as precisely as possible. If not enough volunteers come forward, the Bundestag decide on a so-called compulsory military service, which would have to be regulated in a separate law.
According to the law, the Bundeswehr should have between 186,000 and 190,000 active soldiers in 2026. By 2035, this number is expected to rise to 255,000 to 270,000. The Bundeswehr currently has around 183,000 active soldiers.
Pension package
The Federal Council has approved the government’s pension package. The state chamber voted, among other things, for the extension of the so-called holding line for the pension level and for the expansion of the mother’s pension. The reforms had previously passed the Bundestag after a lengthy dispute.
The resolutions are intended to set the pension level at 48 percent of the current average income by 2031. The decoupling of pensions from wages should be prevented until then. In addition, the mother’s pension will be expanded: When calculating the pension, mothers and fathers should also be recognized for the full three years of parenting benefits for children born before 1992.
Above all, the planned stabilization of pension levels had caused disputes in the Union. Several young MPs criticized the high follow-up costs and threatened a blockade in the Bundestag, but in the end the package received a majority there. The laws can now be drawn up and promulgated and come into force at the turn of the year.
As a further part of the package, a new active pension will be introduced with which the federal government wants to create incentives to work longer beyond retirement age. The state chamber also gave the green light to the second company pension strengthening law, which is intended to further promote company pension provision.
Tax relief
The Federal Council has also approved a package with a whole range of tax relief. The key point of the tax amendment law that has now been passed is the permanent reduction of the sales tax rate for meals in restaurants to seven percent. In addition, the distance allowance of 38 cents per kilometer will now apply from the first kilometer and not just from the 21st kilometer. For low-income earners, the so-called mobility bonus will be extended indefinitely. The law also provides for higher discounts for union contributions, party donations and flat rates for volunteer work.
For parts of the economy, the electricity tax will be permanently reduced to the European minimum of 0.05 cents per kilowatt hour. Around 600,000 companies are expected to benefit from this. As a result, the federal government expects tax revenue shortfalls of around 1.3 billion euros in 2026 and around 2.8 billion euros annually from 2027.
During the day, tax cuts for farmers on agricultural diesel and the reduction in electricity taxes for parts of the economy should also pass the Federal Council. From January 1, 2026, agricultural and forestry businesses will again receive the original refund of 21.48 cents per liter of diesel. Overall, the industry will be relieved of around 430 million euros.
The Bundestag passed the law a good two weeks ago. The new regulations with annual relief of almost five billion euros are scheduled to come into force on January 1, 2026. The states had announced resistance due to the loss of tax revenue, but have now finally agreed.
This article will continue to be updated.
