The leaders of Germany's governing coalition parties have agreed on a sweeping reform package at their coalition committee meeting in the Chancellery. According to the news agency AFP, which learned of the outcome from coalition circles overnight into Thursday, an agreement was reached on income tax reform as well as on projects in the areas of pensions, the labour market, economic growth and cutting bureaucracy.
Chancellor Friedrich Merz (CDU) and the leaders of the SPD and CSU are officially set to brief the public on the results on Thursday morning.
The coalition committee met for almost eight hours, starting on Wednesday afternoon. Ahead of the meeting, Merz had said he expected "a big leap forward (...) in modernising our country." However, several points of contention over the reform plans remained within the coalition beforehand, including how to finance the income tax cuts and the planned shift from a daily to a weekly maximum working-time limit.
On the tax issue, the differing positions resurfaced on Wednesday. Steffen Bilger (CDU), the parliamentary secretary of the Union faction, spoke out against financing planned relief for small and medium incomes solely through higher taxes elsewhere.
The SPD, led by Finance Minister Lars Klingbeil, took the opposite view, arguing that raising the top income tax rate and the so-called "rich tax" - and possibly also inheritance tax - would be a suitable way to offset the cost. Parts of the Union had recently signalled a possible willingness to compromise on the top tax rate for high earners.
Also difficult for the SPD were the coalition's own previously agreed plans to make working hours more flexible. Under the plans, the daily maximum working-time limit would be replaced by a weekly one. Trade unions view the proposal as a weakening of an important social achievement.
On Wednesday at midday, Merz had announced that the main focus would be on strengthening the competitiveness of the German economy again and doing everything necessary "so that private households can consume, but industry can also invest." At the same time, the Chancellor tempered overly high expectations for the meeting, saying there would be "no single big bang."
Within the Union, a dispute had also flared up again recently over the planned expansion of the so-called "mother's pension." CDU economic expert Tilman Kuban called on CSU leader Markus Söder to drop the plan, telling the magazine "Focus" that doing so could enable savings of five billion euros a year. Bilger, the Union's parliamentary secretary, rejected that idea, however.
The CSU had pushed through the expansion of the mother's pension in the coalition agreement. Under the plan, mothers who had children before 1992 would also receive pension credits for their child-rearing contributions.
Pension reform is further along - a commission appointed by the government recently presented comprehensive proposals in this area. Merz and Labour Minister Bärbel Bas (SPD) have already pledged to implement these as part of the package. The coalition committee was expected to reaffirm this commitment and discuss a concrete timetable.
The newspaper "Bild" reported overnight into Thursday that an agreement had also been reached on electoral law reform. This would reverse a reform passed by the previous "traffic light" coalition, which meant that winning a constituency no longer automatically guaranteed a seat in the Bundestag. That change had primarily affected CDU and CSU politicians.
No details of the agreements were given overnight into Thursday, even from within coalition circles. The press conference on the results will take place on Thursday morning at 9:00 a.m. in the garden of the Chancellery, according to the CDU and SPD. In addition to Chancellor and CDU leader Merz, the SPD co-leaders Klingbeil and Bas as well as CSU leader Söder are due to attend.
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