Incoming chancellor warns Germans of falling income

Friedrich Merz has admitted that increased social security contributions could put pressure on net salaries

Germany’s incoming chancellor Friedrich Merz has acknowledged that many citizens could see their net wages decline during his government’s term due to rising social security contributions and uncertain tax relief.

In an interview with the tabloid Bild on Sunday, Merz addressed concerns that rising costs in Germany’s pension, health and long-term care systems are outpacing reforms and eating into household incomes.

“Unfortunately, that’s exactly the trend,” Merz said. “We’ve failed to implement the necessary reforms over the past 30 years.” 

When pressed on whether citizens could end up with less disposable income, Merz responded, “From today's perspective, these fears are certainly not unfounded. But it will be our task to dispel these fears and do the right thing so that at the end of this electoral term, people say: We are better off than at the beginning.”

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According to Merz, the coalition agreement between his Christian Democrats (CDU/CSU) and the Social Democrats (SPD) includes a decision to maintain the pension guarantee – which ensures that a citizen’s pension cannot fall below a fixed threshold – until 2031.

Merz signaled, however, that the coalition would seek to implement health and long-term care reforms in the coming years, which are expected to lead to higher costs for households.

Meanwhile, Merz confirmed that the CDU/CSU and the SPD have so far failed to agree on an income tax relief package for workers, but noted that the coalition has committed to reducing corporate taxes.

When asked whether his party had broken promises made during the election campaign regarding the “debt brake,” Merz acknowledged the criticism. While the CDU had previously advocated maintaining a constitutional rule limiting government borrowing, after the election, Merz’s bloc and the SPD proposed a €1 trillion debt-financed spending package to invest in defense and infrastructure.

“I understand that. This [debt package] can only be justified if we combine it with the reforms we really need in Germany. And I think we’ve written the right things in the coalition agreement,” he said.

Merz is expected to be formally confirmed as chancellor in the coming weeks as negotiations with the SPD to form a coalition government continue. His comments come as a recent Ipsos poll put public support for his CDU/CSU bloc at 24%, with the right-wing Alternative for Germany (AfD) overtaking it by 1%.