The chancellor’s approval ratings have declined significantly, reflecting the decreasing popularity of his coalition government. Only 12 percent of Germans expressed satisfaction with the government’s performance in last month’s ARD Deutschlandtrend survey. At the same time, the AfD is leading national opinion polls and holds a substantial lead in two eastern German states with upcoming elections in September, which could allow the far-right party to gain governing power for the first time since 2013.
Merz described the tax reform agreement between his conservatives and the Social Democratic Party (SPD) as offering essential tax relief for families, though it’s uncertain if it will appease dissatisfied voters.
A household with two adults and two children and a taxable income of €60,000 is projected to save about €600 annually, according to a coalition document outlining the plan. The reform is mainly funded by increasing taxes on high earners, with a 45 percent rate for incomes of €250,000 and above, and 47 percent for €280,000 and above.
The coalition leaders also announced measures to enhance Germany’s export-oriented economy, including a new trade strategy to protect against unfair competition from China by adhering to EU preferential rules in strategic sectors through public funding programs.
“In key areas like infrastructure or defense, we will concentrate on European production — that is, local content,” stated SPD Finance Minister Lars Klingbeil. “We want open trade, but will not tolerate those using unfair practices to undermine jobs and business models here.”
The leaders also aimed to enhance domestic competitiveness by encouraging Sunday work and making it more challenging for workers to take sick leave. Merz had repeatedly criticized German workers for excessive sick days, hindering economic growth.
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