Leaders of Germany’s coalition government have emerged from an eight-hour overnight session at the chancellery with a broad package of reforms covering tax, pensions, the labour market and economic growth, in a deal struck far more swiftly than many in Berlin had anticipated.
A rapid breakthrough
The coalition committee concluded its work with unexpected speed. Party leaders reached agreement on a new reform package after negotiations that stretched deep into the night. Chancellor Friedrich Merz, together with the leaders of the SPD and CSU, secured a foundational accord that had eluded them for weeks.
The package encompasses reforms across taxation, the labour market, pensions, economic growth and the reduction of bureaucracy. Representatives of Merz, Söder, Klingbeil and Bas are expected to formally announce the results of the coalition committee’s work in the garden of the chancellery on Thursday.
“No great surprises”
Speaking before the session began, Chancellor Merz said he anticipated serious changes and progress in the modernisation of the country. The aim, he said, was to make the German economy more competitive. The coalition also wants to ease the burden on both industry and ordinary citizens. But Merz warned immediately that there would be “no great surprises.”
One of the most contentious issues was the reform of income tax and how to finance it. According to t-online.de, the SPD under Lars Klingbeil demanded higher tax rates for the rich and an increase in inheritance tax.
On the other side, CDU representative Steffen Bilger and his team argued against raising taxes to fund the reforms. However, there is a willingness in some parts of the coalition to negotiate and make possible concessions on the question of taxing the wealthy.
Flexible working hours and trade union unease
Another difficult issue for the SPD was the question of working-time flexibility. Plans are now afoot to move from a rigid daily hour limit to a system that analyses working time on a weekly basis. Trade unions fear this could erode hard-won social protections.
On pension policy, the coalition has agreed to implement proposals drawn up by a special commission. Merz and labour minister Bas had previously promised that these ideas would be enacted, and precise timelines are now under discussion.
There was also friction within the coalition over the so-called mothers’ pension. CDU expert Tilman Kuban suggested scrapping the project in order to save five billion euros a year. The CDU’s parliamentary leader, Bilger, rejected the idea. The expanded mothers’ pension provision for children born before 1992 will remain in place, as the CSU enshrined it in the coalition agreement.
Electoral reform rolled back
The committee also agreed to reverse changes to the electoral system introduced by the previous “traffic-light” coalition. Those changes meant that not all direct constituency winners automatically secured a seat in the Bundestag. The rule had disproportionately affected CDU and CSU politicians. Its abolition has therefore been warmly welcomed by the conservative parties.
