Federal government adopts reform package

The coalition leaders have agreed on various reforms. These include pension system reform, tax reform, and measures to reduce bureaucracy.

"It will be a good day for Germany." With these words, Chancellor Friedrich Merz (CDU) opened the press conference on the coalition partners' reform decisions. The CDU, CSU, and SPD have agreed on a major reform package. "We are ensuring more competition, greater flexibility for our companies, less bureaucracy, the preservation of our welfare state, and relief for employees and businesses by lowering taxes and reducing bureaucracy," said Merz.

The reform of the pension system is intended to ensure the implementation of all 33 measures proposed by the Pension Commission The legislative process is expected to be completed by the end of the year. Decisions on the reform of statutory health insurance are expected before the summer recess. "These reforms create security. They guarantee the continued existence of our welfare state, both within the current legislative period and for generations to come," Merz explained.

Tax reform aims to provide relief for lower and middle incomes.

With a reform of income tax, the Federal government Lower and middle incomes will be relieved of up to €600 per year. This will amount to a total of €10 billion. "The basic tax allowance, the child tax allowance, child benefits, and the increase in the employee lump-sum allowance will result in significant tax relief for our country," said Finance Minister Lars Klingbeil (SPD). This will be financed through higher taxes on top earners. Klingbeil: "The wealth tax will in future be 45 percent for taxable incomes above €250.000, and we are introducing a further bracket above €280.000 with a higher rate of 47 percent."

Fixed-term employment contracts without objective justification will in future be permitted for periods exceeding four years, with a maximum of six extensions instead of three. This measure is intended to be in effect until the end of 2030. To reduce high rates of sick leave in companies, the government plans to abolish sick leave certificates issued over the phone. Submitting a certificate of incapacity for work will become mandatory from the first day of illness. Exceptions will be possible if contractually agreed upon or stipulated in collective bargaining agreements. "We can no longer afford this competitive disadvantage caused by long absences from work," Merz emphasized.

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Data protection is being weakened.

Reactions from the tradesRead here Comments from the ZDH and the professional associations.To reduce bureaucracy, the CDU/CSU and SPD plan to ease data protection regulations. "We're streamlining them, simplifying the rules and data protection itself," announced Merz. Furthermore, "all reporting obligations to government agencies will be generally abolished." If a ministry wants to retain reporting obligations, it will have to provide new justification. We're operating on the principle of reversing the burden of proof. "Anything not regulated by EU regulations, we'll leave alone. Compared to previous simplification strategies, this is a real breakthrough."

By autumn, the federal government, together with the states, intends to present proposals for a simpler tax law. "As a first step, we will offer pre-filled digital tax returns through the tax offices," said Merz. Bavarian Minister-President Markus Söder (CSU) also spoke of slowing down new reporting requirements. "Documentation requirements will be massively reduced; we will tackle everything that can be abolished nationally. The requirement for company officers will also be dropped." A deemed approval rule will apply to federal agencies: applications will be considered approved after four months if no decision has been reached by then.

Housing construction should be faster

The EU supply chain law is to be implemented verbatim without any additional regulations. Söder stated, "This will be a huge relief for companies with fewer than 5000 employees, reducing countless requirements." He also promised that the tradesman bonus would be retained. However, it will be smaller than before: The maximum order volume will remain at €6.000, but only 15 percent of it will be tax-deductible instead of 20 percent. Minijobs will also be retained, but they will be taxed at a higher rate. 

The nationalization of private housing companies and rental apartments is to be prevented through socialization laws at the federal level. The coalition partners aim to eliminate uncertainties and thus accelerate housing construction. "We want to build, not expropriate. That's the clear message from the coalition committee. But the federal government will play a significant role in this in the future," said Klingbeil. The federal government will also build housing "on a large scale" in the future. To this end, the government plans to establish a housing company for affordable housing.

Action plan against social benefit abuse

Labor Minister Bärbel Bas (SPD) announced plans to develop programs for the approximately 2,8 million young people without a school-leaving certificate or vocational qualification, in order to integrate them into the labor market. "We are fully aware that not all of them will be able to obtain a vocational qualification, but we want these young people to have a chance in the labor market, with partial qualifications, with vocational training, everything that goes with it." The federal government intends to present an action plan in July to combat the misuse of social benefits, also with the aim of relieving the burden on municipalities.

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