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[German government to pass 2026 budget draft, investment and borrowing to hit new highs] ⑴ The German government will pass a 2026 budget draft on Wednesday, including a record 126.7 billion euros in investment and 174.3 billion euros in borrowing, as part of its infrastructure and defense fiscal plan, according to sources from the German Ministry of Finance. As Europe's largest economy, Germany has fallen from an economic powerhouse to a laggard in the eurozone. Germany is currently abandoning decades of fiscal conservatism, hoping to revive economic growth, modernize its crumbling infrastructure, and expand military spending. Germany is the only economy in the Group of Seven (G7) that has failed to grow in the past two years, and the government predicted in the spring that the economy would stagnate again this year. According to the budget plan, the economic environment in 2025 and 2026 should be significantly better than the above forecast, sources said. The 2026 budget draft will be presented together with the medium-term fiscal framework until 2029, and the entire package is expected to be approved by the cabinet. Budget discussions will begin in parliament at the end of September and are expected to be approved by both houses of parliament before the end of the year. (2) The draft budget for 2026 calls for total spending of €520.5 billion ($606.8 billion), including €126.7 billion ($147.71 billion) in special investments for state modernization, up from €74.5 billion in 2024 and €115.7 billion in 2025. The surge in investment in 2026 and the three years that follow is mainly due to the €500 billion ($583 billion) special infrastructure fund approved in March and defense spending no longer subject to the "debt brake" that limits borrowing to 0.35% of gross domestic product. The infrastructure fund will increase borrowing by €58.9 billion in 2026. The special fund is also not subject to the debt brake. For defense, the €100 billion special fund set up by former Chancellor Scholz after Russia's invasion of Ukraine will be used up in 2027 and will increase borrowing by €25.5 billion in 2026. Borrowing in the core budget will increase from €33.3 billion in 2024 to €89.9 billion in 2026, sources said. Adding the three components together will bring total borrowing to 174.3 billion euros ($203.2 billion) in 2026. Under the previous government, borrowing totaled 50.5 billion euros in 2024. Interest payments will rise more than previously forecast, expected to rise to 66.5 billion euros in 2029, from an earlier estimate of 61.9 billion euros, the sources said.