Merz coalition faces pressure to deliver reforms amid far-right surge

German Chancellor Friedrich Merz is facing significant pressure to enact long-delayed reforms concerning the tax system, pensions, and long-term care insurance. This push comes as the far-right Alternative for Germany (AfD) party gains substantial traction in national and eastern German polls, placing Merz's coalition in a historically weak position ahead of crucial state elections in September.

Merz has stated that initial agreements on these reforms must be reached within the coming weeks, framing it as essential for restoring economic growth and public trust. He indicated that incremental legislative improvements, rather than grand promises, are needed to regain voter confidence, warning that failure could lead to AfD victories.

The coalition, comprising center-right conservatives and center-left Social Democrats, is experiencing low approval ratings amidst widespread economic concerns, including high energy prices and deindustrialization. The potential for an AfD federal election win is a key motivator for maintaining coalition unity, despite deep ideological differences on issues like pension reform, where conservatives favor private market investments and the SPD supports state guarantees.

Consensus on politically sensitive reforms, such as raising retirement ages or lowering pension benefits, remains a challenge. The coalition has utilized expert commissions for initial proposals, but upcoming recommendations are expected to highlight the ideological divide between the governing parties. Lawmakers are also considering tax cuts, with one minister suggesting at least €500 in relief for earners, though its sufficiency to appease dissatisfied voters is uncertain.