Germany's coalition unveils sweeping economic reform package

On July 2, 2026, German Chancellor Friedrich Merz's coalition government announced a sweeping 34-point reform package aimed at reviving Europe's largest economy. The "Programme for Revival and Employment" includes €10 billion in annual income tax relief for low- and middle-income earners, an overhaul of the pension system, and stricter sick leave rules Source: AP News, Al Jazeera.

Tax and pension changes

• Income tax thresholds will be adjusted, with higher earners facing increased rates of up to 47% Source: Euronews. The top rate of 42% remains unchanged but will apply only above €70,000 Source: Euronews.
• The pension reform will gradually raise the retirement age in line with life expectancy, pushing it beyond 67 in the coming decades Source: AP News, Al Jazeera.

Sick leave controversy

The most contentious measure requires employees to present a doctor's certificate from the first day of illness, ending the pandemic-era phone-in option Source: BBC, Al Jazeera. Chancellor Merz argues "the number of sick days in Germany is too high" Source: BBC, with averages reaching 19.5 days per year Source: DW. However, medical groups have criticized the plan as "madness," saying it will overcrowd surgeries Source: BBC. Labour Minister Bärbel Bas expressed doubts about its effect .