Coalition summit
What the Merz government is changing when it comes to citizens’ benefits and pensions
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The leaders of the Union and SPD met until late at night. Now Chancellor Merz and his ministers are presenting the results.
The tips of the coalition have, according to the Chancellor Friedrich Merz On Thursday night, after hours of negotiations, agreed on reforms for the automobile sector, road construction and the social sector. This also includes the active pension, which is due to come on January 1, 2026, said the CDU Chancellor in Berlin. Merz spoke of a “really good atmosphere” during the talks.
Basic security replaces citizens’ money
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Citizens’ benefit is being transformed into basic security for job seekers. The obligations to cooperate and reductions in benefits in the event of a lack of cooperation and missed deadlines will be tightened. In principle, placement in work takes precedence over qualification.
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When it came to sanctions, Bas differentiated between “those who skip appointments” and “those who refuse to work”. Anyone who misses an initial appointment at the job center will be invited again. If the second appointment is not attended, the benefits will be reduced by 30 percent. If a third appointment remains unused, the cash benefits will be stopped completely. If the person concerned does not appear in the following month, all services including payments for rent and heating will be terminated.
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If a beneficiary refuses to take up reasonable work, the cash benefits will be canceled. The sanctions should take hardship cases into account, such as health reasons for not appearing.
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The waiting period for the recognition of assets no longer applies. The amount of protected assets is linked to life performance, for example to age and the duration of unemployment insurance contributions. The waiting period for assuming disproportionately high housing costs also no longer applies.
Transport and infrastructure
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“Everything that is ready for construction will be built,” announced Merz. This applies to rail and road. There is an additional three billion euros for transport infrastructure. The coalition’s decision paper adds: “A total of three billion euros will be mobilized additionally for roads by reallocating funds in the SVIK (special fund for infrastructure and climate neutrality) from the field of microelectronics within the period 2026-29.”
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To promote the “use of zero-emission vehicles in road traffic,” there should be targeted funding “particularly for households with small and medium incomes.” “The funds from the EU Climate Social Fund plus a total of three billion euros from the KTF (Climate and Transformation Fund) will be spent on this funding program by 2029.”
pension
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The active pension should start on January 1, 2026 and create incentives to continue working even after reaching the standard retirement age. Traders, freelancers and self-employed people in agriculture and forestry are excluded. Anyone who continues to work after retirement age pays no taxes on earnings of up to 2,000 euros per month. This allowance is taken into account directly when deducting income tax, which leads to an immediately higher net salary. This will probably cost the state 890 million euros per year, more than initially assumed. Tax losses of this magnitude are expected between 2026 and 2030, according to a report available to Reuters Draft bill des SPD-led Ministry of Finance. The federal and state governments each receive 378 million euros, and the municipalities 134 million.
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The income is also not subject to the progression proviso, so it does not increase the tax rate for the remaining taxable income. The Ministry of Finance initially provided for a progression reservation in order to keep the shortfall in tax revenue due to the active pension lower. The early start pension as an introduction to private pension provision for children will no longer be decided this year, but will then apply retroactively to January 1st.
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The pension package that has already been launched to ensure a pension level of at least 48 percent of average wages by 2031 and to expand the mother’s pension for children born before 1992 is expected to be passed by the Bundestag this year. The package burdens the federal budget with billions of euros and is therefore not without controversy.
E-car bonus
Combustion engine ban postponed
One point of contention remains even after the nightly negotiations: how the federal government feels about the final EU-wide end to new vehicles with combustion engines in 2035. “A final assessment has not yet been found,” said Chancellor Friedrich Merz (CDU). The Union and SPD said they did not want to anticipate the “car summit” in the afternoon. SPD leader Lars Klingbeil then announced that the federal government would quickly position itself on the subject of automobiles.
The coalition committee met late into the night. After around eight hours of deliberations, the leaders of the Union and SPD in the Chancellery parted ways. From the perspective of the Union in particular, legislative resolutions in the fall should prove the government’s ability to act. Poor poll numbers put both government partners under pressure.
Note: This article has been updated to include additional information.
DPA · Reuters
rw/tkr
Source: Stern

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