Germany’s coalition government has finalized its draft federal budget for 2026, marking a significant shift toward expansive fiscal policy amid economic stagnation and heightened defense needs.

The budget, approved by the Bundestag’s budget committee in a marathon session ending early on November 14, 2025, totals €524.5 billion in core spending—€4 billion more than initially projected—and includes unprecedented new borrowing of approximately €180 billion when accounting for special funds.

Germany’s 2025 federal budget, adopted on September 18, 2025, after significant delays due to the collapse of the previous government and early elections, marks a pivotal shift from fiscal austerity to expansive public investment.

Totaling €502.5 billion—an increase of €22 billion from the prior draft—it incorporates constitutional changes from March 2025 allowing unlimited debt financing for defense spending above 1% of GDP and establishing a €500 billion off-budget infrastructure fund.

This package, part of a broader €1 trillion spending initiative, prioritizes defense modernization, infrastructure, climate action, and economic stimulus amid recessionary pressures and geopolitical tensions.

Key spending hikes include €86 billion for defense ramping to €153 billion or 3.5% of GDP by 2029, €115 billion in investments by year-end, and €100 billion for climate-related projects. Priorities focus on transport especially rail, housing, digital infrastructure, education, and the energy transition, with at least 10% of the core budget now dedicated to investments—up from a historical average of 2.7%.

The budget assumes optimistic GDP growth 0.9% potential output and inflation 2.6% deflator, enabling initial net expenditure growth of 4-4.5% through 2026 before tapering to 1.6% by 2029.

It also introduces tax incentives, such as 30% enhanced depreciation for business equipment investments through 2027 and relief for working pensioners, alongside commissions to reform pensions and social welfare starting in 2026.

This figure represents the second-highest annual borrowing in postwar German history, surpassed only by the €215 billion peak during the COVID-19 crisis in 2021.

The plan now heads to a final plenary vote in the Bundestag during the parliamentary week of November 25–28, 2025, where the governing coalition (SPD, CDU/CSU, and Greens) holds a slim majority sufficient for passage, though opposition from the AfD and FDP is expected to fuel heated debate.

The €180 billion in total new debt breaks down as follows: €97.9 billion up from €89.8 billion in the July draft, driven by welfare expansions, pension adjustments, and economic relief measures. €500 billion Infrastructure and Climate Fund off-budget, exempt from debt rules: €58.9 billion in new borrowing for 2026, funding roads, railways, and green initiatives.

Defense Exemptions post-March 2025 debt brake reform. Additional borrowing to support NATO commitments, with total defense outlays reaching €117.2 billion 2.8% of GDP.

This borrowing surge triples the €50.5 billion from 2024 under the previous Scholz government, enabled by constitutional reforms that suspend the “debt brake” limiting new debt to 0.35% of GDP for defense and infrastructure during structural challenges.

+€4bn over initial draft; includes €58.3bn in investments up slightly. +€20bn; meets NATO 2.8% GDP target; €500bn multi-year allocation starts drawdown. Roads, rail, schools; €500bn fund drawdown begins.

Pension hikes, disability support; targeted relief for families and seniors. Investments aim to counter 0.2% GDP contraction in 2025 and boost growth to 1.5% in 2026 via stimulus for transport, education, and digitalization.

Geopolitical Pressures: Surging defense amid Ukraine aid and NATO pledges; total military outlays to hit €161.8 billion by 2029. Critics warn of inflation risks and a projected €30 billion shortfall in 2027, potentially straining future finances in Europe’s largest economy.

Supporters, including SPD’s Thorsten Rudolf, emphasize long-term benefits from the €1 trillion+ in multi-year funds. The vote could signal a broader EU trend toward relaxed fiscal rules, but failure—unlikely given the coalition’s 316 seats—might trigger snap elections.

Lloyds Banking Group, the UK’s largest retail bank, has completed its purchase of Curve—a London-based fintech known for its digital wallet and all-in-one card solutions—for £120 million.

This deal marks a strategic move for Lloyds to bolster its digital payments ecosystem, allowing it to better compete with giants like Apple Pay and Google Wallet. The deal was first reported in early November 2025, with talks starting in July.

Curve notified investors of the signed share sale and purchase agreement earlier this week, and both companies confirmed the completion this morning—though Lloyds did not publicly disclose the exact valuation.

Curve founded in 2015 by Shachar Bialick, enables users to consolidate multiple bank cards into a single digital wallet for seamless payments, budgeting, and rewards management. It operates in over 30 markets across the UK and Europe and has raised more than £250 million in funding historically.

This is not the same as the Ethereum-based Curve Finance protocol. The acquisition integrates Curve’s technology including Curve Pay into Lloyds’ offerings, enhancing its mobile app which already serves 20.9 million users and digital sales processing 95% of retail transactions.

It’s part of Lloyds’ broader push into fintech to challenge neobanks like Monzo and Revolut while expanding in the growing digital wallet space. The deal hasn’t been without drama. Curve’s valuation—pegged at £100-120 million during initial talks—falls well short of its previous funding rounds, leading to widespread disappointment.

In a circular to shareholders, Curve’s board acknowledged the “disappointing” outcome but argued it’s the “best available path forward” to avoid running out of cash this year. The largest external shareholder 12% stake has vocally opposed the sale, citing concerns over management conduct, governance, and ownership disputes.

IDC, which invested six years ago, has hired lawyers Quinn Emanuel and reserves all legal rights, expressing surprise that Lloyds proceeded. Efforts to oust Curve’s chair and CEO were rejected last month amid the turmoil.

The deal, while strategically vital for Lloyds to enhance its digital payments amid competition from Apple Pay and Google Wallet, has been criticized for undervaluing Curve—far below its £250 million in historical funding and previous £133 million valuation—and for opaque governance practices.

Early backers, who poured over £250 million into Curve since 2015, face substantial losses as the sale price represents only about half that amount.

CEO Shachar Bialick warned investors that without the deal, Curve risked exhausting cash reserves in 2025. Recriminations center on how sale proceeds will be allocated, with fears that priority rights for certain investors could shortchange others.

This has fueled perceptions of unfairness in a tightening fintech funding environment marked by rising customer acquisition costs and regulatory pressures. IDC explicitly stated it “does not intend to support the proposed sale and does not believe that it is capable of being implemented without its support.”

IDC highlighted irregularities, such as the controversial reappointment of Chairman Lord Stanley Fink on July 31, 2025, just two days after his removal by the appointing shareholder. This has amplified calls for accountability from management.

Dissident shareholders, including IDC and others, demanded an Extraordinary General Meeting (EGM) in early October 2025 to oust Fink and Bialick over alleged mismanagement and lack of shareholder engagement. The motion was defeated last month, but it exposed deep rifts, with critics accusing the board of poor communication on financial health and sale progress.

The board maintains the process was “fair and in the interests of all shareholders,” but Curve’s silence on media queries has only heightened suspicions of opacity. Lloyds has faced indirect criticism for ignoring red flags, with IDC questioning how a “leading UK institution” could back a deal not in shareholders’ interests.

However, Lloyds views the acquisition as low-risk no material impact on 2025-2026 guidance and essential for modernizing payments, potentially positioning it against neobanks like Monzo and Revolut.

The deal awaits clearance, expected in H1 2026, but could draw scrutiny from bodies like the UK’s Payment Systems Regulator (PSR) and Financial Conduct Authority (FCA), which are probing digital wallet competition.

This saga underscores fintech sector woes: post-boom consolidation, where banks snap up undervalued startups amid funding droughts. While the deal advances, IDC’s legal threats could delay or alter terms, serving as a “cautionary tale” for similar transactions.