The leadership of Germany's governing coalition, composed of the CDU/CSU and the SPD, met on Thursday to finalize agreements on three central reform pillars impacting social welfare, tax policy, and national infrastructure. The decisions signify a move toward stricter requirements for welfare recipients and increased financial incentives for working seniors.
The coalition has agreed to significantly tighten the rules governing the existing Citizen's Benefit (Bürgergeld). As announced by Chancellor Friedrich Merz (CDU), the new measures focus on mandatory job center appointments.
Under the revised system:
CSU Chairman Markus Söder emphasized the political shift this represents, stating that the current Bürgergeld policy is "now history," signaling a departure from the previously implemented structure.
Chancellor Friedrich Merz (CDU) expects the reform to be implemented quickly. He anticipates that it will be debated in the Bundestag before the end of this year and that a decision will be made there in early 2026. “The law will come into force by spring next year at the latest,” Merz said.
The coalition also found common ground on the Active Pension program, designed to keep individuals in the workforce past the official retirement age. The agreement allows retirees to earn up to €2,000 per month tax-free in addition to their standard pension payments.
Furthermore, fulfilling a key demand from the Union, this tax-free amount will be excluded from the Progression Clause (Progressionsvorbehalt). This crucial exemption ensures that the additional income does not inadvertently push the recipient into a higher overall tax bracket, guaranteeing the full intended financial benefit.
According to Merz, the active pension is to be decided by the cabinet next week. It is then to come into force on January 1, 2026, along with further changes to the 2025 pension package. Key points are to be established this year for the early retirement pension, which is intended to help young people build up a pension fund. It is to come into force retroactively on January 1, 2026.
In resolving a financial dispute over Germany's transport budget, the coalition agreed to allocate an additional €3 billion specifically for the "new construction of the road" infrastructure. Chancellor Merz stressed, “It was important to us that we can now start all projects that are ready for construction today.” After two years, a review will be conducted to determine whether the funds are sufficient.
In mid-September, Transport Minister Patrick Schnieder (CDU) called for an additional €15 billion for road expansion and new construction between 2026 and 2029. His ministry warned against halting projects already ready for construction, causing concern among federal states and municipalities.
Finance Minister Lars Klingbeil (SPD) said the amount cited by Schnieder had been "significantly reduced" following a review. He pointed out that around €166 billion was already available until 2029 for the expansion of roads, bridges, railways, and waterways.
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