Under fire German ruling coalition unveils reform package
By Andreas Rinke and Miranda MurrayReuters
German Chancellor and leader of the Christian Democratic Union (CDU) Friedrich Merz, Finance Minister and co-leader of the Social Democratic Party (SPD) Lars Klingbeil, Labour and Social Affairs Minister and SPD co-leader Baerbel Bas, and Christian Social Union (CSU) leader and Bavarian State Premier Markus Soeder attend a press conference following a government coalition board meeting at the Chancellery, in Berlin, Germany, July 2, 2026. REUTERS/Axel Schmidt
Axel Schmidt
Reuters
BERLIN - German Chancellor Friedrich Merz's ruling coalition unveiled a package of reforms on Thursday, including €10 billion ($11 billion) in annual tax relief for lower income earners, changes to the pension system and building more affordable housing.
Trailing in opinion polls behind the far-right Alternative for Germany party, Merz has faced heavy pressure to pass reforms to revive Europe's largest economy but has struggled to overcome internal coalition wrangling and gain momentum.
"We want to get Germany back on track," Merz told reporters on Thursday.
The long list of measures aimed to tackle a variety of issues and cut red tape. They include an action plan against benefit fraud and abolishing workers' ability to obtain sick notes by phone, as well as a goal to cut staffing by 8% in federal ministries through digitisation.
The tax relief will be mainly funded by raising the top rate of tax to 47% from 45% for the highest earners with an annual income of €280,000 or more.
($1 = 0.8777 euros)
(Reporting by Andreas Rinke, Miranda Murray, Friederike Heine and Matthias Williams; editing by Thomas Seythal)
German Chancellor and leader of the Christian Democratic Union (CDU) Friedrich Merz, Finance Minister and co-leader of the Social Democratic Party (SPD) Lars Klingbeil, Labour and Social Affairs Minister and SPD co-leader Baerbel Bas, and Christian Social Union (CSU) leader and Bavarian State Premier Markus Soeder attend a press conference following a government coalition board meeting at the Chancellery, in Berlin, Germany, July 2, 2026. REUTERS/Axel Schmidt Axel Schmidt Reuters
German Finance Minister and co-leader of the Social Democratic Party (SPD) Lars Klingbeil, Labour and Social Affairs Minister and SPD co-leader Baerbel Bas, Chancellor and leader of the Christian Democratic Union (CDU) Friedrich Merz and Christian Social Union (CSU) leader and Bavarian State Premier Markus Soeder attend a press conference following a government coalition board meeting at the Chancellery, in Berlin, Germany, July 2, 2026. REUTERS/Axel Schmidt Axel Schmidt Reuters
German Finance Minister and co-leader of the Social Democratic Party (SPD) Lars Klingbeil, Labour and Social Affairs Minister and SPD co-leader Baerbel Bas, Chancellor and leader of the Christian Democratic Union (CDU) Friedrich Merz and Christian Social Union (CSU) leader and Bavarian State Premier Markus Soeder attend a press conference following a government coalition board meeting at the Chancellery, in Berlin, Germany, July 2, 2026. REUTERS/Axel Schmidt Axel Schmidt Reuters
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This story was originally published July 2, 2026 at 3:47 AM.
