Friedrich Merz, the likely next Chancellor of Germany, has cast doubt on the proposed income tax cuts and minimum wage increases that were part of the coalition agreement between the Union and the SPD. In an interview with the "Bild am Sonntag" on April 13, 2025, Merz stated, "No, it is not fixed," regarding the planned reduction in income tax for small and medium incomes.
Merz emphasized that any tax cuts would only be implemented if the public budget allows it, reflecting concerns over the financial viability of such measures. He noted, "We want to lower income tax when the public budget permits it." This statement highlights the cautious approach Merz is taking as he prepares to lead the new government.
In the same interview, Merz addressed the contentious issue of the minimum wage, which the SPD has communicated would rise to 15 euros per hour by 2026. However, Merz countered this claim, asserting, "We did not agree on that," and clarified that the decision rests solely with the responsible commission. He added that the minimum wage could potentially rise to that amount in 2027, indicating a lack of commitment to the SPD's timeline.
Merz's comments come at a time when public sentiment about the new coalition is mixed. According to a recent INSA survey, 47 percent of Germans believe that the upcoming federal government under Merz will perform poorly, while only 37 percent are optimistic about its potential success. The survey also revealed that 52 percent of respondents do not expect the coalition to implement significant savings measures, while only 33 percent believe the government will follow through on its promises.
Despite the skepticism, the SPD is celebrating its role in the coalition, claiming responsibility for 70 percent of the federal budget due to its control over key ministries. The party has highlighted several achievements in the coalition agreement, including the planned increase of the minimum wage, the Tariftreuegesetz to ensure higher wages for public contracts, incentives for purchasing electric vehicles, and the continuation and tightening of rent control measures.
Merz's leadership will face immediate challenges as he aims to fulfill promises made during the election campaign. He has indicated that the new government will prioritize better border protection, increased deportations, the abolition of the supply chain law, and a reduction in bureaucratic processes. He stated, "We will quickly implement visible changes so that people feel that something is really changing in the country."
However, experts warn that the new coalition may be heading into serious financing difficulties. Jochen Pimpertz, a tax and social expert from the Institute of the German Economy, cautioned that social security contributions have already risen to 42.3 percent of income and are projected to increase to nearly 46 percent in the coming years. This financial strain raises concerns that many workers may end up with less take-home pay due to rising social contributions and stagnant tax cuts.
In the wake of these concerns, Merz acknowledged the fears of voters, stating, "The worry that many employees will have less net income at the end of my term due to rising social contributions and absent tax cuts is certainly not unfounded from today's perspective." He pledged to address these issues and work towards improving the situation for citizens by the end of his term.
As the new government prepares to take office on May 6, 2025, the coalition faces the task of building trust and demonstrating effectiveness. Merz has stressed the importance of cooperation across party lines, stating that trust cannot be mandated but must be cultivated. To facilitate this, he proposed that top politicians from the coalition meet monthly to discuss progress and address concerns.
Despite the challenges ahead, there is a glimmer of hope for the coalition as 55 percent of survey respondents expressed support for the Union and SPD alliance, while 29 percent were opposed. This indicates a cautious optimism among the public, as they await the new government's actions.
As the coalition agreement is still fresh, Merz's administration will need to navigate the complexities of governance while managing the expectations of both the public and coalition partners. The next few months will be crucial in determining whether the new government can deliver on its promises and alleviate the concerns of the electorate.
In addition to domestic issues, Merz has also indicated a desire to tighten European asylum policy, stating that Germany will join initiatives with other EU countries to reform asylum processes. This shift marks a significant change in Germany's approach to migration and reflects the broader political landscape in Europe.
As the designated Chancellor prepares to step into his new role, the coming weeks will reveal whether he can effectively lead the coalition and address the pressing issues facing Germany. With a mixture of skepticism and hope from the public, Merz's leadership will be closely scrutinized as he embarks on this challenging journey.
