German Chancellor Friedrich Merz and his coalition government on Thursday presented a wide-ranging reform package aimed at reviving Germany’s sluggish economy, introducing tax cuts, changes to pensions, stricter sick leave rules and steps to reduce bureaucracy, according to government data and Reuters reports.According to the Associated Press, Merz said that the reforms aim to reposition Europe’s largest economy in the future. “These reforms all have one goal: we are moving toward the future,” he said, adding, “We are strengthening ourselves so that we can live well in these new times.”“From the beginning, we set an agenda with one goal in mind: we want to get Germany back on track. It is now clear that this is possible,” he said.The government has identified 34 measures in the package, including income tax reforms aimed at reducing taxes for low- and middle-income families, pension reform, stricter rules on sick leave, and measures to reduce administrative red tape.The tax changes, once fully implemented in 2028, are expected to provide a family of two working parents and two children with a combined taxable income of 60,000 euros ($64,416) and a tax break of more than 600 euros per year.
The total package is estimated to cost around 10 billion euros annually in tax relief.Regarding pensions, the coalition said it would implement the recommendations of the expert committee, including a gradual increase in the retirement age linked to life expectancy, with the aim of stabilizing the system and avoiding sharp increases in contributions.The reforms also target sick leave regulations. Under the proposed changes, employees will not be able to take leave for up to three days without a doctor’s certificate, with employers able to demand medical proof from the first day of absence.Merz has previously criticized high levels of sick leave, saying they affect productivity in the German economy.The package also includes measures to reduce bureaucracy, including lowering reporting requirements, lowering data protection standards to the European minimum, and simplifying tax filing procedures.Germany’s economy, the largest in Europe, returned to modest growth last year after two consecutive years of contraction, but government forecasts indicate growth of only 0.5% this year amid global and domestic pressures, including energy costs, weak investment and trade tensions.The coalition, which took power just over a year ago, faces criticism for slow progress on reforms. Merz sought to counter this narrative during the ad.“We know that you, ladies and gentlemen, citizens of our country, want to make decisions, and you do not want conflict. And that is exactly what we have provided,” Merz said.
