German Chancellor Friedrich Merz and the CDU/CSU-SPD coalition have unveiled a comprehensive package of reforms aimed at reviving Europe's largest economy. After seven hours of talks in Berlin to draw up a legislative blueprint, the coalition reached an agreement on far-reaching changes to the pension system, labor market, and income tax.
The measures include 10 billion euros in annual tax relief for lower income earners, primarily funded by raising the top tax rate from 45 percent to 47 percent for those with an annual income of 280,000 euros or more. The package also focuses on building more affordable housing.
To reduce red tape and increase efficiency, the coalition plans to cut staffing in federal ministries by 8 percent through digitization. Further administrative reforms include an action plan against benefit fraud and the abolition of the ability for workers to obtain sick notes by phone.
These reforms are intended to boost the sluggish economy and counter the rise of the far-right Alternative for Germany party, as Merz currently trails in opinion polls. Merz expressed confidence in the coalition's delivery of the package, stating that the objective is to get Germany back on track.