Government formation: Coalition negotiations go in a decisive phase

Almost five weeks after the federal election, the coalition negotiations between the Union and the SPD go into the decisive phase. According to preparatory consultations at the specialist level, a group with 19 supporters around the 4 party leader Friedrich Merz (CDU), Markus Söder (CSU), Lars Klingbeil (SPD) and Saskia Esken (SPD) will take care of the difficult issues. The aim is to complete the negotiations in three weeks by Easter at the latest. The new cabinet could then be sworn in in the Bundestag in early May. But everything is far from everything in dry cloths – topics such as conscription, the future of cars with combustion engines and the pension could still be short.

These are some of the main fighting points:

The working group for household and tax has given a particularly large number of controversial points to the top group for decision. When, for example, should the company tax reform made in the probing come, which should make Germany more competitive as a business location? The Union wants to reduce corporation tax from 2026. The SPD initially only relies on better depreciation modalities and only wants to go to the wheel minimally in 2029.

In the case of income tax, it is indicated that the top tax rate should only apply to higher incomes. The SPD wants to raise it from 42 to 47 percent at the same time. In addition, she wants to tax capital income higher as well as – and that is probably the largest sticking point – introducing a wealth tax. The Union stands there.

With inheritance tax, the parties also have completely different approaches: the Union wants to increase allowances for family members. The SPD, on the other hand, wants to put exceptions to the inheritance of companies – with the aim that corporate heirs pay more taxes.

The rejection of asylum seekers at the borders is a main contestation point for which only a formula compromise could be found in the exploratory talks. After that, the rejection should be possible “in coordination with our European neighbors”. However, the opinions between the Union and the SPD diverge whether this means that neighboring states should only be informed about this procedure or have to agree.

The working group has also left open whether the next federal government will meet the Union’s demand to enable asylum procedures outside the EU. Union negotiators also want to tighten citizenship law differently than the SPD. It is to be checked whether “terrorist supporters, anti-Semites and extremists who call up to abolish the freedom-democratic basic order” can be withdrawn from German citizenship if they have further nationality.

Union and the SPD have agreed in the exploratory talks to secure the level of pension – but not at what amount. The point of dispute remains. The SPD wants to keep the current level of 48 percent. This would amount to the foreseeable future to higher contribution rates. The Union counters with a savings proposal: for this pension level, no longer 45 years of contributions should be set, but 47 years, as it says in a working paper.

Another sticking point is the expansion of the mother’s pension agreed at the request of the CSU. The SPD wants the costs of around five billion euros a year to be covered from tax funds and not from the contribution treasury. So far the Union has not been involved.

In Wirtschafts-AG there was also Dissens about the future of cars with combustion engines. The background is the decision of the EU countries and the European Parliament, which had sealed a factual end of new cars with diesel and petrol engines from 2035. The Union has been rejecting this for a long time. In the paper of the working group, the CDU and CSU require that the prohibition of the internal combustion engine from 2035 must be reversed. The SPD, on the other hand, aims to allow zero-emission vehicles across the EU from 2035.

In the exploratory paper, the Union and SPD also announced that it would promote electromobility through an incentive to buy – but what is still unclear. There is disagreement on the introduction of a general speed limit on highways. The SPD wants to limit the speed on motorways to 130 km/h, the Union rejects this.

The Union wants to abolish the suspension of conscription after 55 years in order to counteract the lack of personnel in the Bundeswehr. The SPD unchanged voluntariness and wants a discussion of society as a whole for the introduction of a new military service.

Finances of countries and municipalities

The SPD insists that the federal government takes over half of the old debts of highly indebted municipalities. The CDU, which in many of these places, would say that it would be said to participate. But the CSU turns across – probably also because Bavarian municipalities are comparatively well positioned. For this, the CSU absolutely wants to reform the country financial equalization with the aim of reducing the burden on encoder like Bavaria. The SPD, on the other hand, finds the current system appropriately.