BERLIN (AP) — German Chancellor Friedrich Merz and his government coalition partners on Thursday presented a comprehensive reform package aimed at getting the country’s struggling economy back on track.
The 34 measures include income tax cuts for low- and middle-income households. Review of the creaking pension systemstricter rules regarding employee sick leave, and reducing the country’s stifling bureaucracy.
“These reforms have one goal: to get us into the future,” Merz said Thursday. “We are strengthening ourselves to live well in this new era.”
Center-right and center-left coalition government led by Merz took office just one year ago He promised to reform and turn around the slumping economy of Germany, Europe’s largest economy. It has since become unpopular, in part due to the perception that despite the fight, little has been achieved so far.
Mertz is trying to free his coalition government from that bad reputation.
“From the beginning, we set our agenda with only one goal in mind: we want to get Germany back on track. It is now clear that it is possible,” the conservative chancellor said.
Deep-rooted problems such as energy costs and investment delays
Germany’s economy has recovered slow growth last year After shrinking for two years in a row. The government expects growth to be an overwhelmingly weak 0.5% this year, a figure pushed down by the fallout from the economic crisis. war in iran.
The country of 83.5 million people is already facing issues such as increased competition from Chinese companies, soaring energy costs due to Russia’s full-scale invasion of Ukraine, and the president of the United States. donald trump tariffs and trade threats. In addition, the country faces serious problems, including high production costs, delays in private investment, and rising medical costs and pension systems due to an aging population.
On Thursday, coalition leaders announced that once the tax cuts are fully implemented in 2028, households with two working parents and two children with a combined taxable income of 60,000 euros ($64,416) will receive a tax cut of about 600 euros ($64,40) a year. The total tax cuts resulting from this reform amount to approximately 10 billion euros ($11.4 billion) a year.
Pension reforms include raising the retirement age, currently between 65 and 67 depending on years of service, in stages in line with life expectancy. Coalition leaders said they would implement recommendations set out by a committee of experts and politicians commissioned by the government last month to stabilize the pension system. The aim is to prevent pension levels from falling and avoid the need for employees to significantly increase contributions into their pension schemes over time.
Stricter sick leave rules mean employees will no longer be allowed to report to work sick for up to three days without seeing a doctor or call their doctor to request permission for a week of sick leave without actually seeing a doctor. Instead, employers will be able to require a doctor’s note from the first day a person goes on sick leave.
Merz has repeatedly complained that Germany’s sick leave rates are too high, hurting productivity.
Far-right parties throw cold water on reforms
Regarding Germany’s overrun bureaucracy, various reporting and documentation obligations will be abolished and data protection will be reduced to European minimum standards, the government said, adding that tax return preparation would also be less cumbersome.
Alice Weidel is co-leader of the far-right party Alternative for Germany. came second in the national election Last year, he mocked the reform proposal.
Regarding X, she called the measure “another left-wing redistribution, a minimal compromise that doesn’t deserve to be called ‘reform.'”
“The fact that this is being touted as a ‘breakthrough’ shows only one thing: this government has no capacity to reform,” she wrote.
Nevertheless, Merz appealed to all Germans to support the package.
“We know that our people, ladies and gentlemen, want decisions and do not want conflict, and that is exactly what we have achieved,” the chancellor said as the reforms were introduced to the public in the gardens of the Chancellery in Berlin.
“Join us and help implement the reforms needed now.”
