German Coalition Government Faces Criticism Over Stalled Reforms Amid Pension and Healthcare Challenges

The German coalition government under Chancellor Friedrich Merz is coming under increasing criticism for its slow progress on key reforms, particularly in pensions and healthcare. Despite Chancellor Merz praising the government’s efforts as "unprecedented" and claiming the coalition can enter the new year on a solid footing, crucial issues remain unresolved, creating uncertainty for industries and consumers.

A recent coalition meeting, including CSU leader Markus Söder and SPD representatives Bärbel Bas and Lars Klingbeil, ended with few concrete agreements aside from a pledge to accelerate infrastructure projects. Pension reform, a pressing concern, is set to be tackled by an expert commission in the upcoming year, but no immediate decisions have been reached. Healthcare reforms also remain stalled. Minister Nina Warken’s commission failed to agree on a savings plan, setting a February deadline for a financial rescue strategy. Meanwhile, disputes persist over public contracts legislation and energy regulations, including a contentious heating law banning oil and gas heating in new buildings starting July 2026. Efforts to reduce industrial electricity prices have also been hampered by ongoing EU Commission negotiations.

The economic outlook compounds these challenges, with the ifo Institute downgrading Germany’s growth forecast for 2026. This backdrop fuels criticism that the coalition is postponing critical decisions and delaying reforms urgently needed in the social systems.

The healthcare system faces particularly acute difficulties. Over the past five years, the Krankenkassenbeitrag—the health insurance contribution rate—has risen from 15.7% to 17.5%, weighing heavily on net incomes, which have effectively fallen by 1%, equating to hundreds of euros annually for individuals. Health insurance costs have now nearly caught up to pension contributions, at 18.6%, prompting concerns about the sustainability of the health system. However, while political debates focus heavily on pensions, the challenges in healthcare remain under-addressed.

The "Rente mit 63" policy, originally introduced by the SPD, accelerates the retirement of baby boomers, reducing contributions to both pensions and health insurance just as unemployment rises among younger workers. Healthcare costs continue to escalate, exacerbated by pharmaceutical companies charging higher prices for questionable innovations and systemic inefficiencies including lagging digitalization and hospital overstaffing. Germany’s healthcare system stands as one of the most expensive yet least efficient among industrialized nations, consuming nearly one billion euros daily in insurance contributions.

Critics urge the Merz coalition to implement deep reforms to stabilize both pensions and healthcare. Chancellor Merz acknowledged the complexity but emphasized the government’s ongoing commitment to these efforts. Yet, the persistent delays and disputes risk further eroding public confidence and economic stability as 2026 approaches.