(de-news.net) – According to the Federal Statistical Office (Destatis), Germany’s public sector financing deficit declined to 28.9 billion euros in the first half of 2025, representing a reduction of 19.4 billion euros compared to the same period in 2024. This corresponds to a deficit ratio of 1.3 percent relative to gross domestic product at current prices.

The federal government remained the principal contributor to the overall deficit, accounting for 16.7 billion euros. Nevertheless, its deficit decreased markedly by 10.5 billion euros year-on-year. State governments also recorded a substantial improvement, with their combined deficit falling from 11.6 billion euros to 1.3 billion euros. In contrast, municipalities experienced a significant increase in their deficit, which rose to 14.2 billion euros. Social insurance institutions, which had previously reported a neutral balance, registered a surplus of 3.3 billion euros.

Total expenditures rose by 4.3 percent to 1,070.9 billion euros, while revenues increased by 6.5 percent to 1,042.0 billion euros. Tax revenues grew by 5.1 percent, driven primarily by a 6.9-percent increase in value-added tax and a 4.6 percent rise in income tax. Social contributions expanded by 8.9 percent, reflecting adjustments to statutory health and long-term care insurance rates and contribution ceilings.

On the expenditure side, monetary social benefits—including pensions and unemployment allowances—increased by 20.3 billion euros (+5.8 percent), while in-kind social services such as healthcare and welfare support rose by 13.5 billion euros (+7.1percent). Public sector wage expenditures grew by 10.9 billion euros (+6.3 percent), contributing to overall spending growth. This was partially offset by a 12.9 percent reduction in subsidies, primarily due to lower compensation payments for renewable energy.