The Federal Employment Agency is struggling with massive payment difficulties. These liquidity problems stem from a deficit totaling nine billion euros over the next two years. A weak economy, rising expenditures, and dwindling reserves are exacerbating the situation. In addition to these payment difficulties, four other factors are compounding the problem: a persistent financial crisis, pressure on the labor market, an overstretched federal budget, and steadily increasing borrowing. These factors are acting in concert and driving the agency into a precarious financial position. (handelsblatt: 07.11.25)
Financial crisis forces radical financial injections
A deficit of over five billion euros is projected for the current year. The entire reserve fund – once filled with billions – is being depleted. But even this drastic measure is not enough: the authority also plans to raise 2.2 billion euros through external financing. The financial crisis is thus revealing its full severity, as even fundamental tasks can no longer be covered by contributions alone.
Furthermore, the question arises regarding the agency’s scope for action in the coming year. Although a slight recovery is predicted, the deficit for 2026 amounts to another four billion euros. The state is also filling this gap – which exacerbates payment difficulties in the long term and calls the independence of the Federal Employment Agency into question.
Labor market recovering too slowly
The hoped-for easing of the situation on the labor market is failing to materialize. While the number of unemployed is falling slightly, the associated social costs are not decreasing to the same extent. Retraining measures and qualification programs are becoming more expensive due to the transformation of industry. Sectors such as the automotive and chemical industries are undergoing fundamental changes, which requires targeted investments.
However, the federal budget sets limits. Instead of relief, dependence on loans is growing. The agency is therefore resorting to external financing to secure programs for labor market integration. This additional borrowing accumulates debt and further strains already unstable liquidity reserves.
Borrowing at record levels
With every new billion, the risk of over-indebtedness increases. Borrowing is no longer an exception, but a permanent state of affairs. This external financing provides short-term room for maneuver, but in the long term it jeopardizes the agency’s future viability.
At the same time, financial autonomy is dwindling. The federal budget itself is strained, as it too is struggling with payment difficulties. Responsibilities are becoming blurred between the federal, state, and agency levels. More and more tasks – such as qualifications and recognition procedures – are being shifted to the Federal Employment Agency without corresponding financial compensation. This structural deficiency further exacerbates the payment difficulties.
Government regulations increase the pressure.
New programs for the integration of refugees or for securing skilled workers are being created, but funding commitments often fail to materialize. While wages and thus contribution revenues are rising slightly, this is not enough to plug the multi-billion-euro gaps. The state budget itself is reaching its limits. The Federal Employment Agency is therefore sinking even deeper into liquidity problems and is struggling against a system that imposes increasingly complex requirements without providing adequate funding.
The pressing question therefore is: How long can a social security system that permanently requires loans be sustained?
A combination of financial crisis, an overburdened labor market, failing budgetary discipline, and enormous borrowing needs is leading to an uncontrollable phase of payment uncertainty.