Germany's coalition unveils sweeping reform package

Chancellor Friedrich Merz and the CDU/CSU‑SPD coalition presented a 34‑point reform package aimed at reviving Germany’s economy and countering political pressure from the far‑right. The plan includes about €10 billion a year in income‑tax relief for low‑ and middle‑income households, funded by a higher top‑income surcharge and a modest increase in the “rich‑tax” rate.

Key labour measures expand the maximum duration of fixed‑term contracts to 48 months, broaden “sachgrundlose” (unjustified) temporary contracts and abolish the pandemic‑era telephone sick‑note, requiring a doctor’s certificate from day one of illness. The package also contains pension reforms linking retirement age to life expectancy, a housing‑construction programme via a new federal housing company, and a broad bureaucratic simplification that removes many corporate reporting obligations.

The reforms must be approved by the Bundestag and Bundesrat and are slated to take effect from 2027–2028. Reactions vary: Caritas praised the social balance of the tax changes, while the Greens, the Juso youth wing and doctors’ unions (Virchowbund, BÄK) criticised the sick‑note rules and warned of added strain on medical practices. Economists such as DIW chief Marcel Fratzscher described the package as limited in impact, calling it a “symbolic” rather than transformative package.