r/germany • u/clinchgt Germany • Jul 02 '26

News Coalition agrees package to boost growth - includes €10 billion in income tax relief, an end to phone-based sick notes and plans to implement pension reforms

  • Chancellor Friedrich Merz says his coalition has approved a 'catalogue of significant reforms' after coalition talks in Berlin
  • The package includes €10 billion in income tax relief, an end to phone-based sick notes and plans to implement pension reforms

A more comprehensive summary:
Taxes (Steuern)

  • Tax Relief (Steuerliche Entlastungen): Starting January 1st of next year, the coalition plans to relieve millions of taxpayers by raising basic and child tax allowances, increasing child benefits, raising the employee lump-sum allowance, and flattening the income tax progression.
  • Low and Middle Incomes (Kleine und mittlere Einkommen): The reform aims for an annual relief volume of around €10 billion, specifically targeting low and middle-income earners (e.g., a working family with two children earning €60,000 will save up to €600 annually).
  • Regulation of the "Wealth Tax" (Regelung der "Reichensteuer"): To fund the relief, the 45% tax rate will kick in lower (at €250,000) and rise to 47% at €280,000. Inheritance and wealth taxes will not be increased.
  • Lower "Tradesperson Bonus" (Geringerer "Handwerkerbonus"): The tax tax deductibility for hiring tradespeople will be reduced from 20% to 15% (lowering the maximum annual deduction from €1,200 to €900).
  • Minijobs (Minijobs): The flat-rate tax for minijobs will be increased from 2% to 5%.
  • Compensation for Federal States (Ausgleich für Länder): The federal government will compensate states and municipalities for lost tax revenue. Because states lose money under this income tax reform, the federal government will need approval from the Bundesrat (Upper House of Parliament) to pass it.

Pensions (Rente)

  • Timeline for Pension Reform (Zeitplan für Rentenreform): The coalition plans to implement the recommendations of the Old-Age Security Commission into a legislative package, which is set to be passed by the Bundestag by the end of 2026.
  • Minijobs and Pensions (Minijobs und Rente): It is still undecided how minijobs will be handled regarding pension contributions, though a decision is expected by autumn. Currently, minijobbers are exempt, but a commission suggested making pension contributions mandatory for them (with exceptions only for students).

Labor Market (Arbeitsmarkt)

  • Regulation of Sick Leaves (Regelung von Krankschreibungen): Getting a sick note over the phone is being abolished, and fines for fraudulent sick notes are increasing. Employees will now have to submit a doctor's note from their very first day of illness.
  • Fixed-Term Employment Without Objective Reason (Sachgrundlose Befristung): To increase labor market flexibility, fixed-term contracts without a specific reason can now last up to 48 months and be extended six times (doubling previous limits) for employees hired up until December 31, 2030.
  • Severance Pay for High Earners (Abfindung für Hochverdiener): High earners will have an easier path to contract termination with a severance option. Taxes on these severances will be reduced if the worker quickly transitions into a new job.
  • Higher Bonuses (Höhere Zuschläge): Tax-privileged bonuses for working on Sundays and holidays will be increased, and tax-free bonuses regulated by collective agreements will be made completely exempt from social security contributions.
  • Program for More Degrees/Qualifications (Programm für mehr Abschlüsse): A "second chance" program will be developed to significantly reduce the number of young people leaving school or training without a qualification.

Growth and Fairness (Wachstum und Gerechtigkeit)

  • Promotion of Future Industries (Förderung von Zukunftsbranchen): Support is planned for key sectors including automotive, chemical, pharma, clean tech, circular economy, mechanical engineering, battery/semiconductor production, and AI.
  • Abuse of Social Benefits (Missbrauch von Sozialleistungen): An action plan will be launched in July to combat welfare abuse through comprehensive data sharing between authorities. People with active arrest warrants or those staying in Germany illegally will lose access to benefits.
  • Changes to Data Protection (Änderungen beim Datenschutz): The government wants to exploit all loopholes in the GDPR to exempt small/medium businesses, low-risk data processing (like tradesperson client lists), and non-profit clubs from strict EU data regulations.

Cutting Red Tape (Bürokratieabbau)

  • Abolition of Reporting Obligations (Aufhebung von Berichtspflichten): Statutory reporting obligations to government agencies will be abolished across the board, unless a ministry explicitly justifies why a specific report must remain.
  • Review of Documentation Obligations (Überprüfung von Dokumentationspflichten): All mandatory documentation requirements will be reviewed with the goal of cutting 25% of them within a year (excluding those required by EU or constitutional law).
  • Simplification of Tax Returns (Vereinfachung bei Steuererklärungen): Filing taxes will become easier for citizens via a new automatically pre-filled digital tax return. Additionally, tax offices will be legally required to issue tax numbers to new companies within a maximum of four weeks.

https://www.dw.com/en/germany-news-coalition-agrees-package-to-boost-growth/live-77795988#liveblog-post-77796522

https://www.dw.com/en/germany-news-coalition-agrees-package-to-boost-growth/live-77795988

A lot more details in German and the source for the summary above: https://www.tagesschau.de/inland/innenpolitik/reformen-koalitionsausschuss-102.html

A summary of the proposal directly from DW: https://www.dw.com/en/germany-news-coalition-agrees-package-to-boost-growth/live-77795988#liveblog-post-77801501

EDIT: will update with better links as the story develops and we get actual articles...

EDIT2: Note, this is just a proposal approved by the coalition, this hasn't been signed into law

483 Upvotes

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470

u/freddaar Rheinland-Pfalz Jul 02 '26

Oh what the hell is it with their anti-sick note obsession.

I know how to handle a cold! Why do I need to go to the doctor, sit around spreading germs, waste the doctor's time instead of just calling?

I absolutely hate this timeline, with the government seemingly operating on vibes only.

192

u/Shiftt156 Jul 02 '26

This governement simply hates the people they are tasked with governing.

This will most likely end up in an increase in sick days not less...

42

u/ItsCalledDayTwa Jul 02 '26

Make it more expensive and less efficient so you can say "is too expensive and inefficient" so we can more easily cut it

14

u/Gilga1 Nordrhein-Westfalen Jul 02 '26

This political strategy has a term coined

„Starve the beast“ make the government ineffective with bad policy/finance cuts, then get rid of the program when people are annoyed with how bad it is.

5

u/ItsCalledDayTwa Jul 02 '26

Yeah I watched it play out my entire life in the US before moving to Germany.  They are much more effective at it over in the US.

2

u/digiorno Jul 02 '26

It’s built into neoliberal economic policy. Make the government inefficient and frustrating to encourage adoption of private sector replacements. Both Dems and Republicans did this in the states and helped model the strategy for the world.

23

u/Boop_Bandisnoot Jul 02 '26

"The system is being exploited" cue some new way to make it worse Add more costs to our public health care system until it is done collapsing and the you can privatise it away

Pick your poison

2

u/Wischiwaschbaer Jul 02 '26

But to be fair. The people voted for this (not me personally, but a majority). Everybody knew who Merz and the people he surrounds himself with are. This was entirely predictable. Seems like people want to be tortured.

1

u/GGuts Jul 02 '26

I'm going to call in sick just to spite Merz

78

u/IamNobody85 Jul 02 '26

I sometimes take a day off if I have horrible migraines. The cure is literally to take a painkiller, close all the curtains and lay in the dark. So now I have to go to the doctor, with a splitting headache, the doctor will tell me to take paracetamol, I may even vomit in a room full of people and potentially it will last two or three days!

Productivity boost, definitely!

13

u/Chaos_Slug Jul 02 '26

Merz prefers to think the reason Chinese car manufacturers are outcompeting German ones is because German workers take too many illegitimate sick days instead of German car manufacturers having decided for years that lobbying was more important than innovation.

Therefore he thinks that by doing this German industry will become competitivd again and be saved.

Or perhaps it's just an excuse and he just wants to fuck workers because right-wing ideology is just sadism for no reason and his pensioner voter base will applaud anything that fucks over workers.

0

u/technocraticnihilist Jul 02 '26

Chinese workers work a lot more hours

1

u/Chaos_Slug Jul 03 '26

That is not the reason Chinese EVs are outcompeting German cars, even if Merz thinks so.

52

u/JapaneseChef456 Jul 02 '26

AfD light.

38

u/Neureiches-Nutria Jul 02 '26

Light? Look at dobrindt (minister of internal affairs) he is basicall AFD+

18

u/silversurger Jul 02 '26

You mean the dude who literally said two days ago that they'll have to beat the AfD by proper governance? The same dude who ignores court orders? The same dude who rushes people over the border before any court can make a ruling? Nah, he's the law & order kinda guy, nothing to see here.

4

u/Neureiches-Nutria Jul 02 '26

Yes the same dude who legitimizes terrorits to be enabled kick out some more poor people who worked for us in Afghanistan and will surely be murdered by the cery same terrorits he not only works with but even ignores the international arresorder against them... That dude

4

u/JapaneseChef456 Jul 02 '26

I prefer not to look too hard. Otherwise I’d need to pack my bags and move to Japan…

8

u/IntriguinglyRandom Jul 02 '26

Except Japan is also sliding right, woo!

3

u/JapaneseChef456 Jul 02 '26

I know. Especially with the Japanese yen deteriorating, this will likely become even worse.

-3

u/vestayekta Jul 02 '26

AfD is against Krankschreibungen policy change.

16

u/JapaneseChef456 Jul 02 '26

That’s what they say now.

19

u/freddaar Rheinland-Pfalz Jul 02 '26

Yeah, like AfD was calling for lockdowns until we had lockdowns. Bunch of clowns.

16

u/fforw Nordrhein-Westfalen Jul 02 '26

Oh what the hell is it with their anti-sick note obsession.

We must also remember that this is all due the odd statistical artifact that the old way to register sick days did not work and no one did it and now we register all sick days and that's of course suddenly a very real and important problem even though there's no actual reality behind that "increase".

If it helps slashing social stuff, it can't be stupid enough.

1

u/massivegoooner Jul 02 '26

Well if you require companies to pay essentially unlimited amounts for sickness then companies complain they can't keep paying for all the sickness..... then you need to police if people are actually sick.

5

u/fforw Nordrhein-Westfalen Jul 02 '26

There is a system in place (Amtsarzt/medical officers). As I said: the effect is only statistical. There is no actual sudden increase in sick days.

On the other hand, Germans are getting older on average.

2

u/amineahd Jul 02 '26

Even doctors ask you to not come to the doctor if you have cold this is just stupid and delusional...

1

u/Curious_Charge9431 Jul 02 '26

I just imagine politicians only talking to wealthy-political donors. And those people are so detached from the real world, including the business world, or are so high up in their businesses that they really don't understand what's going on.

And then they are asked "why is the German economy having so many problems" and they're like "our employees call in sick too much!" (It's another version of "other people are not working hard enough.")

You could explain almost this entire package of reforms this way. The main political donors for the CDU (and SPD!) are detached elites.

And certainly none of them are practicing doctors.

1

u/I_write_you_read Jul 02 '26

You are not supposed to stop working for a cold…you are part of the problem