Cabinet discusses 2027 budget plans as Iran war threatens finances

The Cabinet hopes to sign off on core points of its 2027 budget, so it can start to move through parliament.

Germany already plans massive borrowing next year, before adequately factoring in Iran-based costs.

Follow DW.

Here is a roundup of the top headlines and human interest stories from Germany on Wednesday, April 29, 2026.

Job cuts intensify in Germany amid economic crisis
Plans to cut jobs at companies in Germany have further intensified, according to a report published on Wednesday by the ifo Institute , a Munich-based economic think tank.

Hardly any sector will be spared by job cuts.

Among service providers, the Ifo Employment Barometer fell to its lowest level since May 2020, when the first COVID lockdown measures caused a sudden, drastic surge in unemployment.

Rising energy prices and supply chain disruptions caused by the conflict in the Middle East are significantly burdening the global economy.

The prolonged blockade of the Strait of Hormuz, which remains unresolved, is contributing to economic uncertainty.

"Geopolitical uncertainty is spilling over into companies' personnel planning," said Klaus Wohlrabe, head of surveys at ifo.

"More jobs are being cut than created," he warned.

"Sustained easing of tension on the labor market can only be expected once uncertainty significantly subsides," said Wohlrabe.

Fire service mobilized after reported smell of smoke inside Cologne Cathedral
The Cologne fire service was mobilized this afternoon after a churchwarden reported noticing the smell of fire inside the Cologne Cathedral, a spokesperson for the fire service told public broadcaster WDR.

The fire department mobilized all its resources, and firetrucks were on the premises of the twin-spired cathedral for about two hours.

About 70 firefighters were called in to make sure that there wasn't a blaze or danger to the cathedral.

But the major operation was called off after no threat was detected.

The church remains closed, but the public square outside the church remains open to tourists.

The Cologne Cathedral, which attracts about six million visitors every year, is the tallest twin-spired church in the world.

German inflation continues climbing in April, reaching 2.9%
The inflation rate in Germany hit 2.9% in April 2026, said the Federal Statistical Office (Destatis) on Wednesday.

The rate reported measures the change in consumer prices compared with the same month a year earlier.

This is the highest inflation rate Germany has recorded since January 2024, when the figure stood at 2.9%.

The figure was up from 2.7% in March.

Energy prices jumped over 10% in April from a year earlier, their biggest increase for over three years, in the wake of the Iran war.

"The significant increase in the prices of energy products is driving up inflation.

In particular, motor fuel and heating oil prices have risen sharply for consumers since the start of the Iran war," said Ruth Brand, president of Destatis.

Merz says relationship with Trump 'as good as ever' despite differences over Iran war
German Chancellor Friedrich Merz said his relationship with US President Donald Trump remains "as good as ever" from his point of view.

Merz was speaking a day after Trump criticized the German leader in a Truth Social post where Trump wrote : "The Chancellor of Germany, Friedrich Merz, thinks it's OK for Iran to have a Nuclear Weapon.

He doesn’t know what he’s talking about!"
Trump added: "No wonder Germany is doing so poorly, both Economically, and otherwise!"
Merz on Monday said America had no " strategic exit" out of the Iran war .

Merz was speaking to students at a school in western Germany and appeared to suggest that it was Trump's team that was being outwitted by Iran.

Merz was not directly asked about Trump's remarks on Wednesday, but he reiterated his position, saying he "had doubts from the outset about what was set in motion there with the war in Iran." He had made this clear earlier too, he said.

"We are suffering considerably in Germany and in Europe from the consequences of, for example, the closure of the Strait of Hormuz," said Merz.

That has had a direct impact on energy supplies , affecting Europe's top economy.

"And in that respect, I am urging that this conflict be resolved."
German Chancellor Merz criticizes US over Iran war
To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video
Sugar, booze, tobacco: what new health-based levies is the government planning?

One new budget proposal that seemingly won't be finalized in time for 2027, but is planned for introduction by 2028, is a tax on sugary drinks.

Nominally, it is part of the Health Ministry's health insurance reforms, given that the government says it is eyeing public health gains via the new levy and because the revenues will be assigned to funding statutory health insurance.

Health Minister Warken has also proposed increasing the existing taxes on alcohol and tobacco products.

The details of the plan are still under discussion, but a commission recently recommended a potential version of the levy.

It foresaw a charge of €0.24 per liter on drinks with more than 5 grams of sugar per 100 mililiters, and of €0.32 for more than 8.

The proposal met both praise and criticism on Wednesday.

The Federation of German Consumer Organizations (or vzbv ) called the plan a "milestone" for healthcare.

"The sugar levy is coming.

That's good news.

It is a central building block for good nutrition and will unburden our health system in the long term," chairwoman Ramona Pop said.

Meanwhile, the German Federation of the Nutrition Industry (BVE) voiced opposition.

"The idea of a sugar tax has winners and losers.

The winners are the finance minister, inflation, and the AfD," Christoph Minhoff of the BVE said, arguing that it would help the Alternative for Germany (AfD) as it would constitute a breach of a Christian Democrat campaign promise not to impose new tax burdens.

According to the World Health Organization, more than 100 countries, including about half of the EU member states, issue some form of tax on sugary drinks.

Indonesia debates sugar tax to beat type 2 diabetes
Cabinet signs off on key points of 2027 budget
First reports are emerging of the Cabinet meeting in Berlin this morning approving the main points of next year's budget.

Finance Minster Lars Klingbeil is expected to say more at a lunchtime press conference shortly.

The plans allow for new borrowing of €110.8 billion (roughly $113 billion), if only counting debt taken out as part of the core budget.

But with additional borrowing from the so-called special funds (or Sondervermögen ) for longer-term projects like defense, infrastructure and climate spending, that figure rises to roughly €196 billion.

This borrowing is excluded from the limits on new government debt taken out each year.

The plans foresee gradual increases in overall spending by the government in Berlin during the current legislative period, from €543.3 billion in 2027 to €625.1 billion by 2030.

Next, the plans will have to begin a long and potentially arduous path through parliament.

Cabinet approves reforms to statutory health insurance
The Cabinet in Berlin has approved its contentious plans to reform the country's statutory health insurance system (or GKV to use its German acronym).

Health Minister Nina Warken believes that the reforms will bring about savings of €16.3 billion (roughly $19.1 billion) in the coming year, enough to plug a projected deficit of €15.3 billion in the system.

According to Warken's ministry, the changes will also plug fiscal gaps in subsequent years.

The plans include a slight reduction in the planned cuts aiming to minimize the impacts for people covered by the statutory insurance, which is well over 90% of the national population.

Savings will be made through a number of alterations, including higher copayments for prescribed medications at drugstores, limitations to the free extension of insurance to family members, and increases to the contributions to health insurance paid by higher earners.

The Christian Democrat minister Warken's plans to reduce the amount of pay covered for long-term absentees were abandoned however, amid resistance from the Social Democrats.

The draft plans also foresee capping fees for doctors, hospitals and pharmaceutical companies in line with the revenues of the insurance funds.

In recent years, fees had been rising much faster than revenues.

Medical organizations have criticized this plan and warned it could lead to compromises in quality of care.

Berlin under pressure to fix pensions, health care and taxes
NGOs call for higher foreign aid budget amid cuts in Germany and beyond
A group of more than 150 NGOs have issued a joint appeal to the government , calling for at least an additional €2.8 billion (roughly $3.3 billion) in international development aid spending in 2027's budget.

"Despite the many global crises, more than 70% has been cut in these areas since 2022," the VENRO and ONE umbrella organizations lamented in a joint statement.

VENRO board member Michael Herbst noted how the international community had commited to increasing development aid as part of Agenda 2030.

"Instead, in recent years, we've experienced an unprecedented turning away from these goals in large parts of the industrialized world," Herbst said.

"In the US and in Europe governments are cutting their financing for development and humanitarian aid — with drastic consequences for millions of people."
"The world's ablaze and Germany is cutting spending on the fire department," Lisa Ditlmann, the Germany director of the ONE umbrella group said.

"It would make more sense to put out the fire or indeed to ensure that it never gets going in the first place."
"The federal government is cutting in precisely the places where it was logging demonstrable successes: infant mortality has more than halved; HIV positive mothers are bringing healthy babies into the world; many children, particularly girls, are going to school for the first time," Ditlmann said.

steht eine Milliarde Euro bereit.

The appeal's release has been timed to coincide with Cabinet looking to sign off on core components of the 2027 budget later on Wednesday.

Is foreign aid helping Africa or creating dependency?

NRW minister: Hells Angels raids uncovered signs of narcotics business, 44 suspects in total
Here's an update on our headline story yesterday, the major raids targeting Hells Angels bikers in Germany , via the interior minister for the state of North Rhine-Westphalia , Herbert Reul.

Reul spoke to reporters in Düsseldorf early on Wednesday, saying investigators seized valuable assets, weapons and indications of a for-profit drugs business.

He told reporters that assets worth up to €2.5 million (roughly $2.9 million) were seized during Tuesday's raids, which focused on the Leverkusen chapter of the international biker gang.

Reul said there were a total of 44 suspects aged 21-59, and that the president of the relatively recently-founded Leverkusen chapter was arrested.

Multiple Harley-Davidson motorcycles were found in his garage, Reul said, and authorities were investigating who they belonged to.

He said police also found weapons and searched a bank deposit box in Lünen, a town to the north of Dortmund.

"First indications point to a profit-oriented production of narcotic materials," Reul said.

He said that biker gangs often had very little to do with "motorcycle romanticism," and rather more to do with organized crime, drug trafficking, weapons and protection rackets.

He said that people participating in such activities had to take into account "that the police will be standing in your bedroom one morning — not as guests, but with a search warrant."
German job market prospects take hit amid Iran war
Germany's Institute for Employment Research (or IAB, to use its German language acronym) has logged the lowest confidence levels for upcoming employment prospects since the COVID pandemic in its latest April report released this week .

"The ongoing crisis in industry and the oil price shock are weighing on employment," the IAB's Enzo Weber said.

The Nuremberg-based institute's monthly labor market barometer, surveying the current employment situation, was unchanged at 99.4 in April, slightly below the break-even level of 100.

But the component measuring employment sentiment and perceived short-term job prospects dipped by 0.2 points to the neutral mark of 100, the lowest level recorded outside of the COVID pandemic.

Unemployment in March in Germany stood at 6.4%, or just over 3 million people, slightly fewer than the previous month but also slightly more than in March 2025.

April figures are set for publication on Thursday.

The IAB's European barometer, meanwhile, gained 0.4 points, creeping back into positive territory at 100.1 points.

"The Iran war has drastically increased economic risks.

But the European labor market prospects are increasing against the trend," Weber said.

Prosecutors announce arrest of Kazakh man suspected of spying for Russia
Germany's Federal Prosecutor's Office has announced the arrest of a Kazakh national in Berlin on supicison of espionage activities on behalf of Russia .

The man, identified as Sergei K.

was arrested on April 28 in the capital, prosecutors said in a press release on Wednesday .

"The accused is seriously suspected of having been active for a foreign intelligence service," prosecutors said, with a particular focus on assistance for Ukraine amid Russia's invasion .

Officers conducting Tuesday's arrest also searched the premises of the accused and of one other person not suspected of any crime.

"Sergei K.

was in regular contact from Germany, starting in May 2025 at the latest, with a Russian intelligence service," prosecutors wrote.

"Up until his arrest, the accused transmitted numerous items of information of various types to his senior officer."
Prosecutors said this included "details about the military support of the federal government of Germany for Ukraine , as well as the armaments and defense industry — in particular on companies that develop drones and robots."
They also allege that the man regularly sent photos of public buildings in Berlin or of military convoys traveling on highways, "among them a NATO member state's convoy."
According to investigators, the man also told his contact about suitable sabotage targets in Gemany and offered to recruit more people for sabotage or espionage activities.

Germany to buy stake in African ATIDI risk-mitigation insurer
The deal will make Germany the largest non-African stakeholder in the insurer, which is owned by a combination of 24 African countries and 13 international financial institutions.

ATIDI is an investment, trade and political risk-mitigation institution that's designed to provide insurance against risks when investing in Africa and so encourage private sector cash to flow to the continent.

"We are committing to facilitating investment and trade so that more private capital flows into Africa," Radovan said in Nairobi.

"We are contributing towards German investors tapping into this enormous future market that the African continent has to offer."
ATIDI insures against risks such as political and economic crises, anything from a sudden military coup to a spiral of inflation.

The idea is to encourage more risk-averse investors in the private sector to dip their toes into the African market with less fear of losing out as a result.

Germany will be spending in the region of €15 million (roughly $17.5 million) to acquire its stake, with the funds stemming partly from the Development Ministry and partly from the state-owned KfW development bank.

What it's like to move to Germany for work
Core points of 2027 budget up for Cabinet approval as fiscal black hole expands
The federal government's Cabinet aims to sign off on the key points of its 2027 budget on Wednesday, which already foresees the second-largest year of borrowing on record, even before the longer-term economic impact of the war on Iran becomes clear.

The plans foresee new debts of almost €200 billion (roughly $235 billion) in 2027, more than half of that in the core budget.

The remainder will come out of the so-called "special funds" ( Sondervermögen ) for defense spending and infrastructure and climate projects that are exempt from the rules governing how much a German government can borrow each year.

The government is trying to find cuts worth around €20 billion by July in order to cover some of the costs, a process that in itself is liable to prove contentious.

Finance Minister Lars Klingbeil 's as yet undefined aims to reform income tax to provide relief to low and middle-earners is only liable to put further strain on the calculations.

Various welfare cuts or reforms and stealth taxes — on things like alcohol, tobacco, cryptocurrency holdings and sugar — are being discussed to help balance the books.

One of the fastest-growing parts of the outlay is defense spending , amid the pressure on European NATO members to hike their budgets.

The defense spend in 2027 is projected to equate to 3.1% of GDP; that figure consistently stood between 1.1% and 1.2% of GDP between 2011 and 2019.

Meanwhile, this week a temporary reduction on fuel taxes, brought about by the war in Iran, will come into force —  another sign of the conflict's potential to impact both public spending and the broader economy in ways the government cannot yet adequately plan for or anticipate.

The Cabinet is also looking to sign off on its less detailed and longer-term financial planning by starting to outline its plans through 2030, the projected end of the current legislative period.

Moin from Bonn, thanks for joining us.

Sunny and warmer spring temperatures are forecast across most of Germany this Wednesday, a day after major raids against the Hells Angels motorcycle gang , that nine-goal Champions League thriller at the Allianz Arena between Bayern Munich and Paris St Germain, and more news of rock-bottom birth rates in Germany .

In Berlin, eyes are turning to the Cabinet and Finance Minister Lars Klingbeil, as the government starts the process of putting the core points of its 2027 budget and its medium term financing plans through the Bundestag.

It was already going to make grim reading for the bean counters, given plans to continue boosting defense spending, to cut income taxes, and to deal with the ever-anaemic growth that's defined most developed economies ever since 2008.

But the outbreak of war in Iran and the wider Middle East, the need for short-term responses like the cut on fuel taxes that will come into effect on May 1, and drastically revised domestic and international growth forecasts are complicating matters further still.

The Cabinet is also hoping to approve the government's reform plans for statutory public health insurance, an early step on that policy's road towards becoming law.

Outside the political arena, the stranded humpback whale "Timmy" is bound for open waters with the help of a special barge that's guiding the stricken marine mammal on the right course away from the Baltic Sea towards its natural habitat in the Atlantic Ocean.

Stick with us for updates on all these stories, and whatever else is making the news in Germany, during the course of the day.