Black-Red Coalition Enters Final Reform Phase Before Summer Recess

Pensions: Dispute Over Deductions and "Pension at 63"

At the center of the deliberations is the pension system. Chancellor Friedrich Merz (CDU) and Labor Minister Bärbel Bas (SPD) had demonstratively shown unity following the recommendations of a pension commission and announced their intention to implement the proposals in their entirety. At the same time, Bas warned against "cherry-picking." She said: "kein Rosinenpicken." Among the topics under discussion are a penalty-free pension after 45 years and an end to the current "pension at 63," which in practice is only possible from age 64.5. Berlin's Senator for Economics Franziska Giffey (SPD) told the "Tagesspiegel": "Die abschlagsfreie Rente nach 45 Jahren Arbeit sollte aus meiner Sicht möglich bleiben." CDU member of the Bundestag Pascal Reddig, on the other hand, demanded in the Redaktionsnetzwerk Deutschland a swift exit from the "pension at 63" and declared: "Eine Übergangsfrist von fünf Jahren wäre zu lang."

It is also still unclear whether the proposals will be implemented one-to-one. Mecklenburg-Vorpommern's Minister-President Manuela Schwesig (SPD) likewise turned against an unchanged adoption of the pension recommendations. The chair of the Council of Economic Experts, Monika Schnitzer, described the pension proposals to the Funke newspapers as the strongest reform signal to date. She said: "Wenn jetzt auch bei Gesundheit und Pflege der Mut zu Reformen dazukommt und man sich nicht von Interessengruppen ausbremsen lässt, könnte das tatsächlich der Sommer der Reformen werden."

Health and Long-Term Care Insurance: Savings Package Nearing Completion

The savings package for stabilizing statutory health insurance is the most advanced. It is to be adopted in the final sitting week of the Bundestag and Bundesrat. Savings in the billions are planned for health expenditure. At the same time, according to government information, the financing gap in statutory health insurance, which must be closed for 2027, has widened further. The stabilization of long-term care insurance is also part of the reform package.

Taxes: Relief Planned for Low and Middle Incomes

Also on the agenda is a larger income tax reform, which according to the coalition's wishes should primarily relieve low and middle incomes. Tax details will not be decided until after the summer recess; however, the political guidelines are to be confirmed in the coming week. Federal Finance Minister Lars Klingbeil (SPD) plans to bring the government's draft for the 2027 federal budget into cabinet on July 6.

Housing Benefit: Criticism of Planned Cuts

Housing benefit (Wohngeld) will remain controversial. The Federal Ministry of Construction plans savings of 1.5 billion euros in 2027, to be shared between the federal and state governments. The social association VdK subsequently warned of "der größten Sozialkürzungen der letzten Jahre." VdK President Verena Bentele said: "Diese Menschen haben kein Polster, kein zweites Einkommen und keine Rücklagen." She is referring to housing benefit recipients, who according to her account are frequently retirees with small pensions as well as families.

Financing: Higher Taxes on Spirits, Sparkling Wine and Alcopops

Additional revenue is to come from a draft law that will raise taxes on spirits such as rum, vodka, and grain spirit (Korn) as of January 1, 2027. Sparkling wine (Sekt), champagne, and alcopops are also to be taxed more heavily; the beer tax, however, will remain unchanged. The coalition intends to use this to offset part of the reform costs.

The parliamentary managing director of the CDU/CSU parliamentary group, Steffen Bilger, announced in the "Rheinische Post" that the coalition is switching to sprint mode despite the summery temperatures. He said: "Wir wollen wichtige Reformen voranbringen und abschließen." Chancellor Friedrich Merz spoke of a "Momentum" for the reform efforts and expressed confidence for the days ahead. Former Federal President Joachim Gauck called in the "Welt am Sonntag" for greater decisiveness in politics: "Krisenszenarien beschreiben können wir hervorragend. Jetzt muss gehandelt werden. Dann könnte es auch einen Stimmungsumschwung geben." He also urged: "Wir brauchen eine politische Führung, die die Kraft aufbringt, der Bevölkerung zu erklären, warum wir diese Zumutungen akzeptieren müssen. Die Parteien dürfen am Ende nicht wieder vor den eigenen Bedenken kapitulieren."

Whether the deliberations will actually produce an overall package remains open. Critics point to the short deadline until July 10 and to unresolved financing questions, particularly regarding pensions and long-term care. Supporters see in the upcoming decisions a chance for a political shift in mood, as Gauck had recently also urged.