German Coalition Government Sets Reform Agenda Amid Internal Tensions

The coalition government of Chancellor Friedrich Merz, comprising the Union parties and the Social Democratic Party (SPD), has agreed on a comprehensive work plan targeting major reforms through the end of 2026. This roadmap, revealed in a press conference in Münster by coalition leaders Thorsten Frei (Union), Matthias Miersch (SPD), and Alexander Hoffmann (CSU), emphasizes reforms in social legislation, pensions, healthcare, labor market policy, tax reforms, and climate action.

Key components of the agenda include a plan to avoid increasing long-term care insurance contributions by implementing spending limits while boosting revenue. The highly contentious proposal to require sick leave certificates from the very first day of absence is also part of the plan and is expected to provoke debates in the Bundestag. Additionally, labor reforms will allow extending fixed-term contracts without cause, offer more severance pay options, and introduce tax incentives to encourage working on weekends and holidays, supporting employers grappling with economic challenges.

The coalition also recognizes the need to address climate change consequences. It commits to increased investments in both climate protection and adaptation measures, acknowledging the rising frequency of extreme weather events.

Despite the constructive policy roadmap, tensions within the coalition persist. Members of the SPD have voiced sharp criticism of Chancellor Merz’s communication style, accusing him of lacking respect and the appropriate tone during interactions, which has strained relations and disrupted the coalition's desired image of harmony. Matthias Miersch called the plan a clear roadmap for citizens and businesses, and Thorsten Frei stressed trust and cooperation as pivotal for progress, even as SPD members demand more humility from the Chancellor.

The coalition is set to present the proposed care reform to the Cabinet by September 23. The coming months will test the government’s ability to implement its reform agenda while managing internal dissent.