The German federal cabinet has taken decisive steps to address key social and economic issues, approving measures to strengthen occupational pensions, reduce electricity costs, simplify online cancellation of contracts, and implement the European asylum system into national law. These initiatives aim to improve retirement security, ease the financial burden on households and businesses, and modernize Germany’s approach to migration and refugee management.
To reduce high electricity costs, the Cabinet decided that from 2026 the electricity tax for the manufacturing industry, as well as the agriculture and forestry sectors, will be reduced. In addition, a subsidy for grid transmission costs will be introduced to ease the burden on households and businesses, particularly small and medium-sized enterprises.
Federal Minister for Economic Affairs, Katherina Reiche (CDU), estimated that this relief will total €26 billion over four years. The tax cut applies to over 600,000 production companies, ranging from small workshops to large industrial enterprises. Finance Minister Lars Klingbeil explained that lower energy costs are also intended to protect jobs in Germany.
The government projects revenue shortfalls of €1.5 billion in 2026 and €3 billion annually from 2027. Families could save up to €100 per year on electricity bills, in addition to approximately €50 per year from the planned abolition of the gas storage levy. For the current year, the government will offset the gas storage levy account with €3.4 billion from the Climate and Transformation Fund (KTF).
Criticism has emerged from business associations, particularly Die Familienunternehmer, who argue that excluding a large portion of the small and medium sized businesses is unfair and likened it to “mobbing” against these companies. The Union and SPD coalition had initially agreed to cut the tax for “all” companies, but the government chose to limit the reduction to specific sectors. Some parts of the Union questioned this approach, but the coalition committee maintained the decision in July.
The German federal cabinet is set to strengthen occupational pensions as a second pillar of retirement alongside the statutory pension system. On Wednesday, the Cabinet approved a draft law from the Federal Ministry of Labor aimed at expanding access to company pensions, particularly for employees with low incomes and those working in small and medium-sized enterprises (SMEs).
Federal Minister of Labor, Bärbel Bas (SPD), emphasized that the Occupational Pensions Strengthening Act will enable companies to offer pensions to their employees even without a collective bargaining agreement through company agreements. The so-called social partner model will also be expanded, allowing employers’ associations and trade unions to set up binding occupational pension schemes for their respective sectors.
Finance Minister Lars Klingbeil (SPD) highlighted the importance of occupational pensions for enhancing quality of life in retirement, ensuring that people who have worked hard throughout their lives can enjoy financial security in old age. The government also plans to expand state support for company pension schemes.
The Cabinet also approved the draft law to implement the Common European Asylum System (Geas) into German national law. According to the Federal Ministry of the Interior, the legislation provides a framework to coordinate the granting of international protection across the EU and aims to limit irregular migration.
The reform introduces stricter asylum procedures, with a focus on processing cases at EU external borders and the establishment of new asylum centers. Geas also includes a mechanism to distribute refugees across EU member states.
The Ministry emphasized that the legislation seeks a balanced approach between responsibility and solidarity, while also ensuring humanitarian standards to protect refugees, their families, and other vulnerable asylum seekers.
Consumers in Germany will soon have a much simpler way to cancel online contracts. The federal cabinet decided that companies must provide a mandatory cancellation button, allowing contracts concluded online to be revoked with a single click.
“If ordering online is child’s play, cancellation should be just as easy,” explained Consumer Protection Minister Stefanie Hubig (SPD). She emphasized that this measure will protect consumers from unwanted contracts while saving time and frustration. Under current law, the statutory withdrawal period is 14 days. With this reform, Germany is implementing changes to the EU Consumer Rights Directive.
However, the government also plans to limit the so-called “eternal right of withdrawal” in financial services contracts. Currently, in some cases, consumers can revoke contracts even years later. In the future, withdrawals will be capped:
Additionally, companies offering financial services must provide clear explanations of products and contract consequences. To reduce bureaucracy, businesses will also no longer be required to provide contract terms in paper form upon request, reflecting the push toward digitization.
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