Under-fire German ruling coalition unveils reform package to boost economy
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Germany’s ruling coalition has agreed on sweeping tax, labour and pension reforms, Chancellor Friedrich Merz said Thursday, a breakthrough aimed at reviving the struggling economy and countering the rise of the far right. “We are working to increase the flexibility of our businesses,” Merz told a Berlin press conference after lengthy talks between his centre-right CDU/CSU alliance and their coalition partners, the centre-left SPD. “We are working to cut red tape. We are working to protect our welfare state, and we are working to ease the burden on employees and companies by lowering taxes,” said Merz, who had promised a “great leap forward” for German growth. The package includes income tax cuts worth 10 billion euros ($11.4bn), to be financed by higher taxes on those earning more than 250,000 euros a year. And changes to the pension system will eventually see the retirement age rise past 67. “The highest earners in this country will take on a larger share” of the tax burden, said Finance Minister and Vice Chancellor Lars Klingbeil of the SPD. “That is fair, so that our country can move forward.” The tax relief would mean an average family is about 600 euros better off per year, the parties said. The coalition also agreed to reduce corporate reporting obligations that companies see as burdensome, and to scrap the right of employees to get a sick note by telephone with the aim of reducing worker absentee days in Germany. It will also be possible to employ people on temporary contracts for up to four years. Business organisations welcomed the plans, but trade union IG Metall said the labour reforms were “an attack on workers’ rights”. ‘Under pressure’ The coalition parties — in power since May last year in Europe’s biggest economy — had been struggling for months to agree on a series of thorny issues. The government is also keen to show it can get to grips with the country’s problems and to diminish the appeal of the far-right Alternative for Germany (AfD), which has