Merz unveils sweeping reform push for Germany: Tax cuts, pension overhaul, and new sick leave rules

German Chancellor Friedrich Merz and his government coalition partners presented a comprehensive reform package with the goal of getting the country’s sluggish economy back on track. The 34 measures include cuts to income tax for low- and middle-income families, an overhaul of the creaking pension system, tougher rules for employees’ sick leave, and a reduction of the country’s stifling bureaucracy. “These reforms all have one goal: We’re setting out into the future,” Merz said. “We’re strengthening ourselves so that we can live well in these new times.” Merz is trying to cut his government coalition free from that negative reputation. Germany's economy returned to modest growth last year after shrinking for two years in a row. The government expects underwhelming growth of 0.5% this year, a figure that has been pushed down by the fallout from the war in Iran. The government coalition leaders said that the tax cuts, once fully implemented in 2028, would give an annual tax break of about 600 euros ($686.40) for a family with two working parents, two children, and a total taxable income of 60,000 euros ($68,640). The total tax relief provided by the reform amounts to approximately 10 billion euros ($11.4 billion) per year. The pension system reform would include gradually raising the retirement age, currently between 65 and 67 years, depending on the number of years worked, in line with life expectancy. The tougher rules for sick leave would no longer allow employees to call in sick to work for up to three days without seeing a doctor, or call up the doctor and ask for a sick leave letter for one week without actually seeing the doctor. Instead, employers would be able to ask for a doctor's certificate from the first day a person is on sick leave. This article was provided by The Associated Press.