Coalition negotiations in the capital | Berlin and the love of money

Work as part of the new construction of the A100 bridge: The replacement construction is usually significantly more expensive than recurring renovation. Debt for investments in infrastructure is therefore considered sensible from a budgetary perspective. Photo: IMAGO/Stefan Zeitz Cramped coffers, budget holes, mountains of debt. There is no shortage of metaphors to describe the difficult financial situation in the state of Berlin. And the prospective coalition partners from the Left, the Greens and the SPD also want to save money. There are signs that point to greater financial leeway in the coming legislature.

The debt level of 77 billion euros cannot be shaken. Just to cover the interest incurred, 1.6 billion euros are incurred annually. For the years 2026 and 2027, the CDU and SPD had decided on a total budget volume of 45.5 and 46.5 billion respectively. It is undisputed that the budget situation did not improve under the CDU and SPD. Reserves were almost completely used up. This year, Berlin is expected to spend 4.6 billion euros more than it takes in. The Senate expects a deficit of five billion euros in the following years.

Black and Red actually had to and wanted to make significant savings. But then it became possible again for the federal states to take on new debt. In the federal government, the CDU and SPD reformed the debt brake in March 2025; the strict “black zero” gave way to a new debt limit of 0.35 percent of gross domestic product. Since then, Berlin has been allowed to take out loans totaling 800 million euros annually.

In fact, according to the draft budget at the time, Berlin will take out loans amounting to 3.9 billion euros in 2026. The largest item, at 2.4 billion euros, represents so-called financial transactions that are passed on to state-owned companies. Berlin is thus investing in infrastructure, such as housing and bridge construction. These loans are not taken into account for the debt brake because the state of Berlin does not use them directly. The housing associations are expected to generate more income through new housing construction and thus repay the loan to the state of Berlin. However, the instrument is controversial because it is unclear to what extent the investments will actually pay off in the end. In the end, the loans have to be repaid with interest one way or another.

Even if the expenditure is within the legal framework, exploiting it has only worsened the cash situation in Berlin. At least that's how the State Audit Office, Berlin's auditor, sees it. Its annual report for 2026 will be published in about two weeks. Karin Klingen, the President of the State Audit Office, had already warned last year: “Taking on more and more debt is not a solution.” Expenditures have to come down. "Berlin has to do something it has forgotten: save money," said Klingen. Berlin is taking in more and more money, but spending is growing even faster, Klingen recently told the Handelsblatt. The bottom line is that she sees the budget gap increasing by two billion euros every year. The situation is “dramatic”.

The Stability Council will also look to Berlin at its meeting on “regular budget monitoring” on December 3rd. The federal and state committee has instruments at its disposal to persuade Berlin to adopt a corrected financial policy. In the worst case, the Stability Council determines a budget emergency and imposes a restructuring program, usually for at least two years. It's not that far yet. But in 2026, Berlin exceeded the limits of three of the four key indicators, including per capita debt, for the second time in a row.

»We will secure the social and sustainable city and enable future investments. At the same time, the budget is in a state of imbalance that we have to remedy,” say the Left, the Greens and the SPD in their exploratory paper. The focus is on medium and long-term savings. In the short term, the parliamentary groups see potential savings of 900 million euros for 2027, and a further 500 million euros annually from 2028.

According to media reports, the Left, the Greens and the SPD have already agreed on a number of projects that together will cost a previously unforeseen 220 million euros per year, including a rent cap for state-owned housing companies, a four-point plan for economic development, the expansion of cycling infrastructure and bus lanes, additional funds for climate adaptation and heat transition, lowering the price of the social ticket to nine euros and additional funds for addiction prevention and drug consumption rooms as well as the renovation of police stations and fire departments. In addition, there are already “financially relevant agreements” on socialization, exhaustion of the subway framework agreement as well as funds for climate adaptation in the special fund and the Charité children's clinic. cle

It is usual for the new coalition to adopt a supplementary budget in order to be able to set its own priorities. The scope for your own projects, which involve additional expenses, is “very limited”. In order to enable investments and at the same time relieve the burden on the “core budget”, the Left, the Greens and the SPD want to continue using the instrument of financial transactions. Unlike the outgoing government, the parliamentary groups agree to increase revenue through higher and new taxes and fees. The property transfer tax, packaging tax and resident parking are being discussed here.

Economist Tom Krebs takes a much more confident view of the economic signs for a red-green-red government. Krebs is a professor at the University of Mannheim and a member of the Minimum Wage Commission. In an article for the business magazine “Surplus,” Krebs contradicts the Senate’s previous budget forecast. Instead of an annual deficit of five billion euros, he expects a deficit of just 500 million euros. The current budget situation is difficult, writes Krebs, but a closer look shows "that a progressive financial policy for a better Berlin is possible."

On the one hand, Krebs is correcting tax revenues upwards by two billion. In 2025, the Senate assumed a billion less taxes than it ultimately collected. The tax estimate is “systematically too pessimistic,” he writes. Krebs sees another billion in additional tax revenue due to clear optimism about economic growth. “If the Berlin economy manages to build on previous successes between 2027 and 2030 and grow one percentage point more annually than the national average, cumulative tax revenues during this period could be more than three billion euros higher than previously estimated,” writes Krebs. The Senate's tax estimate ignores this special factor.

Lastly, Cancer is a proponent of financial transactions. According to his information, the economist wants to remove this 2.5 billion euros in loan debt from expenditure and the budget. They would increase production potential and, in the long term, tax revenues. According to Krebs, financial transactions “do not create any additional need for consolidation.” Rather, they should be expanded in a targeted manner "in order to set the course for a better future for the city with a public investment offensive."

With us, no one has to pay to be informed. Sounds like a bad business model? It is too. But independent journalism and participation for everyone are more important to us than profit. Journalism still costs money: research, printing and all the people who do it. That's why we depend on you. We need 300,000 euros by the end of the year.

Donate once or regularly, every amount counts. So that nd remains.