A wobbling government is an expensive one: what Berlin’s crisis costs founders, in numbers

Whether Friedrich Merz is still chancellor at Christmas is a question for pollsters. What a government does to your money when it has no majority for reform but a reliable majority for spending is a question for a calculator. We own a calculator.

This is the most number-heavy piece on this site. Every figure has a source at the bottom. Where something is a forecast, a draft or an opinion, it says so.

The bill so far#

You’ll read a round 53% for the spending share in commentaries. The highest official figure we found is the Stability Council’s 52½% for 2029. Round as you like; the direction is the news. Seven points of GDP in ten years is roughly €300 billion a year that used to be spent by the people who earned it.

The debt package deserves its own paragraphs, with dates. The election was on 23 February 2025. Article 39 of the Basic Law gives a new Bundestag until “the thirtieth day after the election” to meet. It met on 25 March: day thirty, the last one allowed. In that window the old Bundestag was called back for special sessions on 13 and 18 March and changed the constitution: a €500 billion special fund for infrastructure and climate, running twelve years, and every euro of defence spending above 1% of GDP exempt from the debt brake. 512 votes to 206. AfD and Left MPs asked the Constitutional Court to stop the sessions; it rejected their urgent applications on 13 and 17 March.

So it was legal. It was also the only way: in the new parliament the AfD and the Left hold 216 of 630 seats, more than a third, and both voted no. One week later the same amendment would have failed.

How big is it? The fund is €500 billion and the defence exemption has no ceiling. On the day of the vote the news agency AFP put the plans at “more than one trillion euros” over a decade; the Tax Foundation calls it a €1 trillion package. That’s where the trillion in the commentaries comes from, and the government’s own plan fits: IW Köln counts €972 billion of new federal borrowing for 2026 to 2030 alone.

Promised and delivered#

Campaigns are advertising. Coalition agreements are contracts. Here is the contract against the delivery.

One row out of eight, and that one starts in the year before the next scheduled election.

My read#

On 4 October, Roland Tichy published a commentary declaring the chancellor politically finished. I agree with the verdict. This chancellorship has failed by its own standards, and the table above is the evidence. A party that won 28.5% promising sound money and growth now polls at 18–23% together with its Bavarian sister. Subtract the CSU, which INSA put at 4.4% nationwide in June, and the CDU alone lands somewhere between 14% and 19%. That subtraction is mine; no institute publishes it weekly.

The SPD blocked a lot, and the record shows it: the pension level went through untouched, the pension commission’s 33 proposals of June 2026 still have no bill, the working-time law got tied to collective agreements, the corporate tax cut stayed parked in 2028. The Union did its own share of spending: a higher mothers’ pension at about €5 billion a year, 7% VAT for restaurants, a bigger commuter allowance. Two parties, one direction.

But here’s the part that matters for your money: I don’t think the next chancellor does better. Not because the candidates are worse. Because the spreadsheet is the same.

The reform trap in numbers#

Public-choice economics has a blunt view of politicians: they respond to incentives like everybody else. So look at the incentives.

Read it top to bottom. Voters over 60 outnumber voters under 30 three to one. Any party that cuts pensions loses the largest voting bloc in the country, so no party will. The pension guarantee is law. Interest is a contract. Defence is a NATO pledge. That’s six euros in ten spoken for before a single road is repaired, and the share rises every year.

Could a brave government change the rules? Structural changes need the constitution, the constitution needs two thirds, and two thirds needs votes from the AfD or the Left. Both voted no in March 2025. A different coalition gets a different logo on the same arithmetic.

So a government that can’t cut and can’t reform has three sources of money left: debt, inflation, and people who can’t vote it out or can’t leave fast enough. The official plan uses the first and assumes it stays cheap.

What the forecasts were worth#

Before you trust the plan, check the planners’ record.

Three growth forecasts, three misses, all in the same direction. The interest plan was out by a factor of two within three years. I’m not claiming anyone cooks the numbers. A ministry doesn’t publish a plan in which its own budget fails, so the unpleasant page never gets printed. Here it is.

The scenario nobody prints: what if rates rise#

In 2021 the federal government borrowed at an average of –0.16%. In 2025 it paid 2.60% on new debt. The whole stock still cost only 1.61% at the end of 2025, because the cheap old bonds haven’t all matured. They will: the average maturity is 7.8 years. The financial plan’s €80.7 billion of interest for 2030 already assumes more expensive money; the IMK institute backs out a rate on new borrowing rising from 3.1% to over 3.6%.

So we did what the plan doesn’t do and moved the rate. The inputs:

• Federal debt including special funds at the end of 2025: €1,794bn (Finanzagentur).
• New borrowing 2026–2030: €972bn (IW Köln). Debt in 2030: about €2,766bn.
• Federal tax revenue 2030: €437.3bn (financial plan of August 2026).
• Ten-year Bund yield on 1 October 2026: 3.60%.

Our arithmetic, not a forecast. The formula for 2030: planned interest plus the extra rate times €2,000bn. That’s the debt we assume will carry post-2025 rates by then: the €972bn of new borrowing plus a bit over half of today’s stock (€321.5bn falls due in 2026 alone). As a cross-check, IMK calculates that freezing yields at their June 2026 level would save €14bn in 2030, which points to the same order of magnitude. The last column is €2,766bn times the average rate (3.6% in the plan case), divided by the tax revenue of 2030. It’s static: no new debt after 2030, no growth in revenue.

Now the other way round. What average rate on €2,766bn eats which share of federal taxes?

Read the first row again. A quarter of all federal taxes going to bondholders takes an average rate of just under 4%. The ten-year Bund paid 3.60% on 1 October.

And the budget has no slack to absorb it. In the 2027 draft the social ministry (€201.5bn), defence (€109.7bn) and interest (€41.9bn) add up to €353bn. Federal tax revenue that year: €395bn. That’s 89% gone on three lines. Everything else the federal state does already runs on credit.

My read#

A state is finished at the latest when interest eats all its tax revenue. In practice it’s finished long before, because lenders can do this sum too. The day they doubt the answer, they ask for a higher rate, and the higher rate makes the answer worse.

All large agencies rate Germany AAA; Moody’s confirmed it on 18 September 2026. That’s a fact about today, and I draw no comfort from it for 2032. In 1923 the Reich could at least print the marks it owed at home. Today’s Germany borrows in a currency issued in Frankfurt by a central bank that EU law (Article 123 of the EU treaty) forbids from financing governments directly.

So I think a German state bankruptcy is on the cards, in whatever polite form it takes. It only needs higher interest rates, and nobody in Berlin sets those. I’m not giving you a date. I’m giving you the table.

What states did the last times#

A state that can’t pay doesn’t close. It collects. The record, here and in the euro area:

• 1923, the printing press. In November 1923 one US dollar cost 4.2 trillion marks. The new Rentenmark replaced one trillion paper marks. Savings in marks were gone.
• 1931, the exit. An emergency decree of 8 December 1931, in the middle of a fiscal crisis, introduced the Reich Flight Tax: 25% of your assets if you left with more than 200,000 Reichsmark. In 1934 the next government cut the threshold to 50,000 and turned the tax on the people it was driving out. It stayed on the books until 1953. A tool built for one emergency was ready for whoever governed next.
• 1948, the savings. Currency reform. For 100 Reichsmark in the bank you ended up with 6.50 Deutsche Mark.
• 1952, the assets. The Equalisation of Burdens Act put a levy of 50% on assets as they stood on 21 June 1948, payable in quarterly instalments over about 30 years. The last one was due on 31 March 1979. This is the precedent that matters most for owners: it hit property and businesses, the things that had survived the currency reform.
• Greece, 2012 and 2015. Private holders of about €197bn of Greek bonds took a cut of 53.5% of face value. In June 2015 came capital controls: banks shut for three weeks, €60 a day from the cash machine, the last limits lifted in September 2019.
• Cyprus, 2013. Bank of Cyprus converted 47.5% of deposits above €100,000 into shares. In the euro area, over a weekend.

None of that is a prediction. It’s the menu. And every dish on it was served to people who owned something and hadn’t moved it in time.

“That can’t happen here”#

The usual answer: that was then, it’s unthinkable now. In 2019 I’d have agreed. Nobody in Western Europe would have believed that a government could forbid you to leave your flat, check passports at Schengen borders and regulate who may visit you at home. In March 2020 it was law within weeks. Germany put controls on five of its borders on 16 March 2020.

The courts did rule, eventually. Germany’s Federal Administrative Court found Bavaria’s stay-at-home order of March 2020 disproportionate; that ruling is dated 22 November 2022. Austria’s Constitutional Court declared the general ban on entering public places unlawful in July 2020. Spain’s struck down the home confinement of the first state of alarm in July 2021. And Germany’s Constitutional Court upheld the federal “emergency brake”, night curfews and contact limits included, in November 2021.

My conclusion, and it’s an opinion: once an emergency is declared, basic rights can be suspended in days, most of it holds up in court, and where it doesn’t, the correction arrives when the measure is long over. I’m not rerunning the pandemic. The point is about risk: “it has never happened” isn’t a risk model. A levy on assets or an exit tax tightened overnight would be a smaller step than the ones we’ve all watched being taken, and both have a German precedent.

Who pays: the record#

Facts first. These are in force.

• Exit tax, 2022. Moving within the EU used to mean an interest-free, open-ended deferral. Since 1 January 2022 it’s seven annual instalments, usually against security. Details in our exit tax guide.
• Exit tax on funds, 2025. Since 1 January 2025 it also covers fund units: a stake of 1% or more, or acquisition costs of €500,000 or more. A large ETF position can now trigger a tax written for company owners.
• Solidarity surcharge. Introduced for reunification, upheld by the Constitutional Court on 26 March 2025. Still 5.5% on top of corporate tax, capital gains tax and higher incomes.
• Contribution ceilings. The pension ceiling rose from €7,550 to €8,450 a month in two years, the health ceiling from €5,175 to €5,812.50. For an employee above both, employer and employee together now pay about €3,018 a month instead of €2,620. That’s €4,773 more a year, a rise of 15%, and nobody had to announce a tax increase.

Now the proposals. None of these is law.

• Top rate. The cabinet draft of 2 September 2026: 45% from €250,000, a new 47% from €280,000. First reading in the Bundestag is scheduled for 8 October.
• Crypto. A finance ministry draft would end the one-year holding period for coins bought after 2026. See crypto and moving abroad.
• Inheritance tax. The SPD published a reform paper in January 2026; the Union rejected it. The Constitutional Court hears two cases on the business-asset exemptions on 12 and 13 October 2026. A ruling could force parliament’s hand whatever the coalition wants.
• Wealth tax. A Left party motion (1% above €1 million) went to committee in March 2026. Not in the coalition agreement.
• Capital gains flat tax. The SPD asked for 30% instead of 25% in the 2025 coalition talks. Not adopted.

See the pattern? Everything that passed makes leaving or earning more expensive. Everything on the wish list does the same.

Not just Germany#

Berlin is the worked example, not the exception.

• France spends 57.2% of GDP, second in the EU behind Finland (57.7%). Two prime ministers fell over budgets in nine months: December 2024 and September 2025. The 20% minimum tax on high incomes, sold as a one-off, now runs until the deficit drops below 3%. Leaving France
• The UK abolished the non-dom regime on 6 April 2025. Inheritance tax now follows you for three to ten years after you leave. An exit charge has been floated; it isn’t law. Leaving the UK
• Italy sells newcomers a flat tax on foreign income. The price: €100,000 until 2024, €200,000 from August 2024, €300,000 from 2026.
• The Netherlands: the lower house voted in February 2026 to tax unrealised gains at 36% a year from 2028. The senate postponed its vote. Leaving the Netherlands
• Spain introduced a “temporary” wealth tax above €3 million for 2022 and 2023. In December 2023 it was extended without an end date. Leaving Spain
• Belgium taxes gains on financial assets at 10% since 2026, with an exit rule attached. Austria charges 27.5% on any portfolio when you go. Belgium, Austria
• Norway removed its five-year limit on exit tax in 2022 and tightened again in 2024. A think tank citing finance ministry data counts 105 people worth over NOK 100 million who left in 2022 and 2023, more than in the eight years before.

The one honest counter-example: France softened its exit tax in 2019, cutting the holding period from 15 years to two or five. Parliament tried to reverse that in 2024 and again in 2025. Both attempts died with the budget, not for lack of appetite.

Who has already left#

Britain is the live experiment: non-dom regime gone on 6 April 2025, departures on the public record since.

A filing shows where someone says they live, not why they went. Read the dates anyway.

The Sunday Times counted 165 billionaires in Britain in 2024 and 156 in 2025, the biggest fall since the list began in 1989; in 2026 it was 157. An FT analysis of Companies House data found 3,790 company directors who gave up UK residence between October 2024 and July 2025, 40% more than a year earlier. HMRC’s own statistics for the time after the reform aren’t due until 2027. Henley & Partners estimated a net loss of 16,500 millionaires for the UK in 2025 and 400 for Germany. That’s an estimate; the filings aren’t.

Germany publishes less. Destatis counts heads, 97,000 citizens net in 2025, not what they earned. The last exit-tax figure the government gave parliament is for 2018: €180 million assessed, about €170 million of it deferred under the rules that ended in 2022. Companies moved earlier: net direct investment outflows of €94–125 billion a year from 2021 to 2023, before 2025 turned slightly positive.

What weak governments close first#

A strong government can cut taxes on the people most able to leave, and sell it as growth policy. A weak one can’t get that past its own coalition, so it does the cheaper thing and makes leaving cost more. No majority of voters has ever marched for emigrants.

That’s why exit rules are a ratchet. Germany 2022, Norway 2022 and 2024, Germany’s funds 2025, Belgium 2026. Each step leaves old cases alone and catches whoever decides next.

Staying versus a real move: ten years#

Same founder as in our flag theory piece: German, one-person consultancy, €150,000 profit a year, pays most of it out. Rough maths at 2026 rates, before social contributions and allowances.

Three things about this table. The staying column assumes Berlin raises nothing for ten years; reread the sections above and decide how safe that is. The Cyprus column isn’t carved in stone either: Cyprus lifted its corporate tax from 12.5% to 15% this year. And the last row is the argument for founders who haven’t built the GmbH yet. The move that costs €264,000 with a company costs no exit tax without one.

The catch: you must live there. A mailbox in Limassol and a life in Munich is not a plan, it’s a tax audit with a delay. Model your own profit in the tax calculator.

What to do while the doors are open#

Calm, legal, in this order.

1. This month: know your exposure. Company stakes of 1% or more, fund units above €500,000 in cost. Write the list. Most people who owe exit tax find out from a removal quote.
2. This quarter: get a valuation. The tax office’s standard formula multiplies profit by 13.75. For a one-person firm that’s a fantasy price, and you’re allowed to prove a lower one.
3. Check what follows you. German citizens who move to a low-tax country and keep substantial interests at home stay partly taxable for ten years. Leaving Germany and taxes when moving abroad cover it; other countries have their own tails.
4. Within six months: a second bank in a second country. Not for secrecy, which died with automatic reporting. For redundancy. See offshore banking.
5. Within a year: a plan B you could live in. A residence permit you’ve used, a flat you’ve seen, a tax home that passes the residency tests. The Jurisdiction Finder sorts the candidates.
6. Then decide. Staying is a fine decision if you’ve priced it. Drifting isn’t a decision.

One honest sentence for employees: if you earn a salary, own no company and hold a normal ETF plan, most of this article is noise, and your lever is your next pay negotiation. It matters for founders, shareholders and investors.

The ballot changes the faces#

Vote. It’s cheap and it feels good. But the next coalition inherits the same pensioners, the same interest bill and the same two-thirds problem, and it will reach the same conclusions about who can be made to pay. I can’t tell you when rates rise or which item on the menu gets ordered. Neither can the finance ministry. It just doesn’t print that page.

What an individual can change is how much of their life sits under one government. That’s the whole of flag theory: passport, tax home, company, bank and assets, not all in the same pair of hands. You can’t fix the spreadsheet. You can stop being a line on it.

This article is opinion and general information, not tax or legal advice. Figures as of 5 October 2026; forecasts belong to the institutions named, the rate scenarios are our arithmetic and not predictions, and drafts can change.

Want your own numbers checked before anyone moves a box? That’s what a strategy session is for.

Sources#

• Federal Ministry of Finance – development of the government spending ratio (monthly report, May 2026)
• Destatis – gross domestic product 2025 (15 January 2026)
• Destatis – revised national accounts (30 July 2026)
• Joint Economic Forecast, autumn 2026 (24 September 2026)
• WKO – government spending ratios, EU Commission data (May 2026)
• ifo Schnelldienst 12/2025 – spending ratio 2019 and Stability Council projection for 2029
• Bundestag – special session of 18 March 2025, constitutional amendment
• Bundesrat – decision of 21 March 2025
• Bundestag – 2027 budget draft and financial plan to 2030 (6 July 2026)
• Bundestag – interest expenditure in the financial plan (14 August 2026)
• Bundestag – 2026 budget, labour and social affairs
• Bundestag – 2027 draft budget, labour and social affairs
• IW Köln – federal budget 2030: interest and borrowing (29 April 2026)
• Deutsche Bundesbank – German government debt 2025
• Haufe – social security contribution rates 2026
• AOK – contribution rates 2024
• Deutsche Rentenversicherung – social security parameters 2026
• Bundesrat – social security parameters regulation 2025
• Federal Government – pension insurance report 2025
• Bundestag – roll-call vote on the pension package, 5 December 2025
• ZDFheute – pension package: costs by year
• ZDFheute – pension commission proposals (June 2026)
• Heidelberg24 – IGES projection of contribution rates to 2035
• IW Köln – health insurance surcharge forecast 2027
• OECD – Taxing Wages 2026
• wahlrecht.de – current polls by institute
• inFranken – ARD-DeutschlandTrend, October 2026: satisfaction with the chancellor
• Junge Freiheit – INSA figures for CDU and CSU separately (24 June 2026)
• Federal Returning Officer – 2025 election, representative statistics
• Coalition agreement CDU, CSU and SPD (April 2025)
• Leinetal24 – the debt brake in the CDU/CSU election programme
• Schwäbische – CDU “Agenda 2030”: growth of at least two per cent
• t-online – coalition decision on the electricity tax (July 2025)
• web.de – the savings promises on welfare, checked
• ZDFheute – basic income support bill: the draft’s own savings estimate
• buergergeld.org – spending on the benefit 2024 and 2025
• Federal Government – cabinet results of 2 September 2026
• Der Betrieb – income tax reform bill: details
• Bundestag – income tax reform, first reading
• National Regulatory Control Council – press releases (July 2026)
• KPMG – investment programme act: corporate tax steps 2028–2032
• Destatis – 16th coordinated population projection
• ZDFheute – corporate insolvencies 2025 and first half of 2026
• EY – industry barometer, first quarter of 2026
• Destatis – migration 2025 (1 June 2026)
• IW Köln – direct investment flows (Bundesbank data)
• Lebensmittel Praxis – IW: foreign direct investment 2025
• Foreign Tax Act (AStG) – §2 and §6
• Investment Tax Act – §19, exit tax on fund units
• Finanztip – solidarity surcharge: who still pays
• Rödl & Partner – Constitutional Court reviews inheritance tax
• Rödl & Partner – SPD reform ideas for inheritance tax
• Rödl & Partner – wealth tax debates in the Bundestag
• Stuttgarter Zeitung – SPD and the capital gains flat tax
• Eurostat – government finance statistics
• LCL – extension of the French minimum tax on high incomes
• Mayer Brown – French finance bill 2025: rejection of the revenue part
• GOV.UK – Inheritance Tax if you’re a long-term UK resident
• Simmons & Simmons – Italian flat tax for new residents, 2026
• SRA – Dutch box 3 actual-return bill not yet adopted (July 2026)
• Cuatrecasas – Spain, Royal Decree-law 8/2023
• Skatteetaten – Norwegian exit tax
• Civita – emigration of wealthy Norwegians (2025)
• Euronews – Henley estimates of millionaire migration
• Basic Law – Article 39 (thirty-day limit)
• Bundestag – constituent session of 25 March 2025
• Bundestag – special session of 13 March 2025
• Federal Constitutional Court – press release 25/2025 (14 March 2025)
• Federal Constitutional Court – press release 27/2025 (17 March 2025)
• The Local / AFP – German MPs pass spending package (18 March 2025)
• Tax Foundation – Germany’s spending package (22 April 2025)
• Finanzagentur – federal borrowing report 2025 (debt stock, maturity, interest cost)
• Finanzagentur – current Bund yields
• Finanzagentur – ratings of the Federal Republic
• Bundestag – financial plan 2026 to 2030 (printed paper 21/7301)
• Bundestag – financial plan 2021 to 2025 (printed paper 19/31501)
• Federal Ministry of Finance – federal budget, monthly report November 2025
• IMK Policy Brief 219 – federal interest expenditure (July 2026)
• Joint Economic Forecast, autumn 2022
• Joint Economic Forecast – review of the government’s autumn projection 2023
• Joint Economic Forecast – review of the government’s autumn projection 2024
• Treaty on the Functioning of the EU – Article 123
• Bundestag – the hyperinflation of 1923
• Deutsches Historisches Museum – currency reform of 1923
• Legal Tribune Online – the Reich Flight Tax of 1931
• Der Betrieb – the history of German exit taxation
• Deutsche Bundesbank – currency reform of 1948
• Bundestag Research Services – the levy under the Equalisation of Burdens Act (2008)
• European Stability Mechanism – Greek private sector debt restructuring, March 2012
• Journal of Financial Crises (Yale) – Greek capital controls 2015 to 2019
• European Stability Mechanism – FAQ on Cyprus
• Federal Government – border controls of March 2020
• Federal Administrative Court – press release 70/2022 (22 November 2022)
• Federal Constitutional Court – press release 101/2021, federal emergency brake
• Austrian Constitutional Court – decision V 363/2020 of 14 July 2020
• Almacén de Derecho – commentary on Spanish Constitutional Court ruling 148/2021
• Property Industry Eye – David Reuben leaves the UK (5 October 2026)
• City AM – Britain’s second-richest person leaves for Monaco
• The Independent – billionaires leaving the UK (October 2026)
• The Tribune / PTI – Lakshmi Mittal leaves the UK (24 November 2025)
• The National – Revolut founder’s residence moved to the UAE (7 October 2025)
• Fortune / Bloomberg – the Livingstone brothers move to Monaco (24 April 2025)
• Bloomberg Tax – Alan Howard becomes Swiss resident (23 December 2025)
• City AM – departures including Guillaume Pousaz (June 2025)
• Reuters – Sunday Times Rich List 2025: fewer billionaires
• Irish News / PA – Sunday Times Rich List 2026
• City AM – company directors leaving the UK (FT analysis of Companies House)
• GOV.UK – statistics on non-domiciled taxpayers
• Henley & Partners – Private Wealth Migration Report 2025
• Bundestag – exit tax assessed in 2018 (government answer, 2021)
• Tichys Einblick – Roland Tichy’s commentary on the chancellor (4 October 2026)