The chancellor’s approval ratings have fallen to new lows recently, mirroring the declining popularity of his governing coalition. Only 12 percent of Germans said they were satisfied with the government’s performance in last month’s benchmark ARD Deutschlandtrend survey. At the same time, the AfD is leading national opinion surveys and maintaining an even bigger lead in the polls in two eastern German states that will hold elections in September — something that would put the far-right party in a position to potentially assume real governing power for the first time since its founding in 2013.
Merz framed the blueprint tax reform deal between his conservatives and their center-left coalition partners in the Social Democratic Party (SPD) as providing much-needed tax relief for families, though it’s unclear whether the level of relief provided will satisfy disgruntled voters.
A household of two adults and two children with a taxable income of €60,000 is expected to save around €600 a year, according to a coalition document detailing the plan. The reform is to be financed primarily by increasing taxes on high earners: raising the tax rate to 45 percent on incomes of €250,000 and above, and to 47 percent on incomes of €280,000 and above.
The coalition leaders also agreed on other measures announced Thursday to boost Germany’s export-oriented economy, including a new trade strategy intended to protect the bloc’s biggest economy against unfair competition from China by committing to EU preferential rules in strategic areas with public funding programs.
“In strategically important areas such as infrastructure or defense, we will focus on European production — that is, local content,” said SPD Finance Minister Lars Klingbeil. “Our position is clear: We want open trade. But we will not accept others who do not play by the rules and use unfair means to destroy jobs and business models here.”
The leaders also set out to boost domestic competitiveness by incentivizing work on Sundays and making it harder for German workers to take sick leave. Merz had repeatedly criticized German workers for taking too many sick days and hampering economic growth.