Presenting the plan on Thursday, Merz said the reforms are designed to “set out into the future” and strengthen Germany’s economic foundations at a time of mounting domestic and global pressures.

“We’re strengthening ourselves so that we can live well in these new times,” he said.

Tax relief for families and workers

A key pillar of the package is income tax cuts for low- and middle-income households.

Once fully implemented by 2028, the government says a typical family with two working parents, two children, and a taxable income of around €60,000 would receive tax relief of about €600 annually.

Overall, the reforms are expected to reduce tax revenue by roughly €10 billion per year.

Pension system overhaul to address aging pressures

The coalition also plans a gradual pension reform, including steps to align the retirement age more closely with rising life expectancy.

Current retirement eligibility in Germany ranges between 65 and 67, depending on work history.

Officials said they would adopt recommendations from a recent expert panel aimed at stabilizing the pension system and preventing future increases in employee contributions or reductions in pension payouts.

Tougher sick leave rules to boost productivity

The reforms introduce stricter controls on sick leave. Employees will no longer be able to remain off work for up to three days without a doctor’s certificate, nor obtain extended sick notes without an in-person medical consultation.

From now on, employers will be able to request medical documentation from the first day of absence, a move the government says is intended to curb excessive absenteeism.

Merz has repeatedly argued that high sick leave rates are dragging down productivity.

Drive to cut bureaucracy and red tape

Another major focus is reducing administrative burden.

The government plans to eliminate several reporting requirements, simplify tax filing procedures, and scale back data protection rules to the European minimum standards.

Officials say the goal is to ease compliance costs and improve efficiency for businesses and citizens.

Political pushback and skepticism

The package has already drawn criticism from opposition figures. Alice Weidel, co-leader of the far-right Alternative for Germany (AfD), dismissed the reforms as “minimal compromises” and accused the government of presenting them as a breakthrough despite lacking real impact.

Economic backdrop: fragile recovery

Germany’s economy returned to modest growth last year after two consecutive years of contraction, but forecasts remain weak, with expected growth of just 0.5% this year.

Analysts say the country continues to struggle with high energy costs, global trade pressures, declining investment, and demographic challenges linked to an aging population.

Merz seeks public backing

Despite political criticism and declining approval ratings for the coalition, Merz urged citizens to support the reforms.

“We know that you want decisions, not conflict,” he said. “Join us and support us in carrying out the reforms that are now necessary.”