Germany's CDU/CSU alliance has, for now, failed to secure its proposed electricity tax cut for private households in negotiations with its coalition partner, the SPD. Budget negotiators from the CDU/CSU and SPD were "unfortunately" unable to find a way to finance the measure during their discussions on the 2027 federal budget, CDU/CSU parliamentary group leader Thorsten Frei (CDU) said late Wednesday evening in Berlin.
However, the CDU/CSU and SPD reached compromises on several other disputed budget issues ahead of the Bundestag Budget Committee's final deliberations on the 2027 federal budget, scheduled for Thursday.
Under the agreements, the plastic tax opposed by the CDU/CSU will not be introduced, while the planned sugar tax will be postponed until 2028. Frei and CSU parliamentary group leader Alexander Hoffmann described these decisions as successes.
The SPD, meanwhile, secured the reversal of planned cuts to housing benefits and the continuation of the supplementary child allowance. SPD parliamentary group leader Matthias Miersch estimated the cost of the compromises at around €2 billion. "This is a framework that we believe we can finance very well," Miersch said at a joint press conference with Frei and Hoffmann.
The coalition parties were initially unable to find funding for the CDU/CSU's proposal to fully compensate taxpayers for cold progression, also known as bracket creep, which occurs when inflation-related wage increases lead to a higher tax burden. Frei said compensation for cold progression would be introduced in 2027, "possibly retroactively."
He also stressed that reducing electricity taxes remained the "top priority" for the CDU/CSU parliamentary group. "We will also try, with this in mind, to put our shared goal into practice as soon as possible," Frei said.
He added that the coalition must continue working to reduce energy prices quickly. Frei initially identified January 1, 2028, as the target date but later clarified that such relief should ideally take effect as early as next year.
The CDU/CSU and SPD parliamentary groups held special meetings on Wednesday evening to discuss the proposed compromises. According to sources within the CDU/CSU parliamentary group, members expressed dissatisfaction that several important budget priorities had not been achieved.
Frei subsequently described the discussions as a "long and intensive meeting." The SPD parliamentary group, by contrast, expressed satisfaction with the results. SPD parliamentary group leader Miersch acknowledged that relief from electricity taxes and cold progression would be "desirable."
"But it has to be financed on a sound basis, and that is why we will now have to examine over the next few days whether this funding can be found, because it is not available so far," Miersch said.
A reduction in electricity taxes for everyone is already included in the coalition agreement and was recently called for again by Chancellor Friedrich Merz (CDU). However, Finance Minister Lars Klingbeil (SPD) saw no additional financial room for the measure in the 2027 federal budget.
Although Klingbeil expressed openness to such a tax reduction, he demanded corresponding proposals to finance the measure, which would require billions of euros. The CDU/CSU and SPD budget negotiators were ultimately unable to find a solution.
The CDU/CSU succeeded in blocking the proposed plastic tax, which has faced strong opposition from businesses. Frei said negotiators had been unable to find an "unbureaucratic solution" that would achieve the intended "environmental steering effect." "And that is why such a tax cannot be introduced next year," he said.
The sugar tax planned by the SPD-led Federal Ministry of Finance will be postponed by six months until 2028. The CDU/CSU-SPD coalition had agreed to introduce a tax on sugar-sweetened beverages during negotiations over a savings package for Germany's statutory health insurance system.
The amount of the tax will depend on the sugar content of the beverages. The revised proposal now provides for three tax brackets instead of the two originally planned. CSU parliamentary group leader Hoffmann described the postponement as the "right step."
"We said from the very beginning that it must be about achieving a genuine steering effect. That is why it is important to give manufacturers time to reformulate their products," Hoffmann said.
In the area of social spending, several originally planned cuts will be softened, with the SPD apparently prevailing in the negotiations. The supplementary child allowance (Kinderzuschlag) will no longer be phased out and will continue to be paid. The planned cuts to housing benefits (Wohngeld) have also been scrapped.
SPD General Secretary Tim Klüssendorf told Stern magazine that this was "one of the best pieces of news from the budget agreement." SPD parliamentary group leader Miersch said he was "glad that we are reversing most of the savings that had been planned, particularly those affecting families."
To increase government revenue, the SPD parliamentary group continues to support an excess profits tax, which the CDU/CSU opposes. Miersch said his party remained committed to the proposal, particularly in view of companies' current profit margins. "In that respect, we still have a little work ahead of us," he said.
The Bundestag Budget Committee is scheduled to make the final amendments to the 2027 federal budget on Thursday. During the committee's so-called Bereinigungssitzung, or final budget reconciliation session, lawmakers will incorporate the coalition agreements reached on Wednesday as well as the results of the latest tax revenue forecast.
Miersch said Wednesday's compromises had allowed the coalition to resolve several "major issues in advance" of the committee meeting. CDU/CSU parliamentary group leader Frei acknowledged that the challenges facing the federal budget were "quite enormous."
CSU parliamentary group leader Hoffmann offered a positive assessment of cooperation within the coalition. "This coalition has so far solved every challenge presented to it. It will also succeed in doing so with the 2027 federal budget," Hoffmann said.
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