The CDU/CSU and SPD have unveiled their coalition agreement, outlining a sweeping political agenda that touches nearly every aspect of life in Germany—from migration and taxes to pensions, digitalization, and military service. The pact, presented at a joint press conference by party leaders Friedrich Merz, Markus Söder, Lars Klingbeil, and Saskia Esken, sets the stage for the next legislative term under a Schwarz-Rot (black-red) government.
Taxes and economy: Relief and reforms ahead
The coalition promises tax relief for workers by adjusting income brackets and making the tax rate curve flatter, while rejecting SPD calls for tax hikes on high earners.
Corporate tax cuts: Starting in 2028, the corporate tax rate will be lowered by 1% each year over five years.
Investment incentive: A 30% depreciation allowance on capital investments is planned for 2025–2027. Lower income tax for small and medium incomes (implementation around 2027).
Soli tax remains unchanged.
Industrial electricity price: Energy-intensive industries will receive special support.
Migration and asylum: Tighter rules coming
The coalition is moving to tighten migration policy, including: Two-year freeze on family reunification for refugees with limited protection status. Border checks and rejections, even for asylum seekers.
A large-scale deportation initiative to return those without the right to remain.
No more Bürgergeld (welfare) for Ukrainian refugees, a CDU campaign demand.
Welfare and labor: Stricter rules, more incentives
Major changes are coming to Germany’s welfare system: A new basic income system with tougher sanctions for non-compliance, including full benefit suspension.
Minimum wage target of €15/hour by 2026, pending commission approval.
Tax-free earnings up to €2,000/month for retirees who continue working past retirement age (Active Retirement bonus).
Tax-free bonuses for overtime work that exceeds standard full-time hours.
Pensions and social programs
Pension level fixed at 48% until 2031.
“Early start pension” program begins in 2026: Children enrolled in German schools will receive €10/month from age 6 to 18 as a state investment in their future.
Parental allowance to be increased, including for self-employed mothers who will gain a statutory right to maternity protection.
Citizenship and civil rights: New limits ahead
Turbo-naturalization after three years will be reversed.
Mandatory language and development tests for all 4-year-olds.
Mandatory data retention to return: Telecoms must store IP addresses for three months.
Wehrpflicht, national security, and law enforcement
No return to compulsory military service, but a new voluntary military service model will be introduced.
Creation of a National Security Council within the Chancellor’s Office.
Digitalization and education
A new Ministry for Digitalization and State Modernization will be created.
School modernization and a new Digital Pact are on the way.
Bafög reform in 2026: Housing allowance will rise from €380 to €440/month.
Housing, energy, and climate policy
The controversial Heating Act will be scrapped. A new Building Energy Law will be introduced—more flexible and tech-neutral.
No return to nuclear energy for the time being.
E-mobility incentives will continue.
Transport and mobility
Germany ticket will remain beyond 2025.
Commuter allowance will be set at €0.38 per km from the first kilometer starting in 2026.
No speed limit on highways.
Spending, debt, and state reform
The government aims to cut public spending:
8% reduction in federal staff over four years (excluding security agencies).
Number of federal commissioners halved.
Municipalities struggling with debt will receive €250 million per year in federal aid.
Other key reforms
Cannabis legalization will be reassessed with an open outcome.
Cashless payments will become mandatory even in small shops.
Receipt printing obligation to be abolished.
Germany’s supply chain law will be repealed in favor of the EU version, with less red tape.
What happens next?
The agreement will be presented to party leadership and caucuses today. If all internal votes go smoothly, Friedrich Merz could be elected Chancellor on May 7.
