The Bundesbank is issuing an unusually sharp warning. It considers Chancellor Merz’s fiscal policy risky. Politicians are accepting a growing budget deficit, even though the debt brake could foreseeably be violated. This is precisely where the danger of a constitutional crisis arises. This combination of high levels of new debt, growing uncertainty, and a lack of course correction is acting like a political stress test for the stability of the country. (berliner-Zeitung: 25.12.25)
Bundesbank Sees Escalating Risks
In its analysis, the Bundesbank makes it clear that spending policies are disrupting the balance of public finances, although the central bank rarely expresses this view so directly. It sees rising interest payments, increasing social spending, and structural increases in expenditure, while revenues are not keeping pace. This is precisely what is growing the budget gap, which is widening every year and eroding confidence.
At the same time, the situation is worsening because the government is politically exploiting the debt brake. It is postponing necessary adjustments, even though experts have long been calling for countermeasures. This increases the risk that decisions will no longer be made by politicians, but rather by legal authorities.
Bundesbank questions Merz’s authority
With its clear warning, the Bundesbank directly attacks political responsibility. It signals that Chancellor Merz is aware of the financial reality, but nevertheless continues to rely on high spending, even though the budget limit is clearly faltering. This is precisely where the real danger to economic credibility begins.
The Chancellor speaks of the government’s ability to act, but the figures show the opposite. The budget deficit is growing faster than the economic effects are taking hold. This creates a dynamic that narrows the room for maneuver and increases the financial pressure, while the constitutional dispute over the consequences is already foreseeable.
Bundesbank sees no credible Plan B
The Bundesbank is particularly critical of the fact that there is no clear alternative course of action. She sees no structural austerity measures, no sustainable financing plan, and no willingness to make unpopular decisions. If this policy continues, the likelihood of court intervention increases because the debt brake will once again become a legal constraint.
Chancellor Merz is thus faced with a choice. Either he stabilizes spending policy early on, or he risks an escalation in which political control is lost. This is precisely why the central bank’s warning acts as a wake-up call.
2026 will be a litmus test for trust and order.
In the coming years, it will be decided whether the government stays the course or implements course corrections. The budget deficit cannot be moderated indefinitely through political means, because there are legal and economic limits. And the longer the delay, the greater the risk of a constitutional crisis, which would unsettle not only institutions, but also markets and citizens.
Germany is thus facing a phase in which fiscal policy becomes a question of power. The Bundesbank is issuing a warning. Now, politicians must prove that they are taking responsibility and that Chancellor Merz can actually get the situation under control.