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The three-party coalition that will govern Germany is expected to increase the burden on social security
2025-04-14 09:22:35 / BOTA
According to estimates by the German Economic Institute (IW), the future coalition of the conservative CDU/CSU parties and the Social Democrats "is expected to face serious financial difficulties."
Jochen Pimpertz, an expert on taxes and social issues at the IW, made it clear in an interview with the German press agency DPA in Berlin that social security contributions for employees and employers in Germany have already reached 42.3 percent of income. Referring to data collected and analyzed by the private research institute IGES, Pimpertz said that social security contributions are expected to increase to almost 46 percent in the coming years.
One reason is rising health insurance costs. The increase in spending is also greater than previously assumed, as lawmakers have required health insurance funds to reduce their financial reserves in order to stabilize contribution rates after the coronavirus pandemic. There is now no longer a buffer to cushion a continued increase in contribution rates.
Additional spending in the billions to stabilize pension levels
The CDU/CSU and SPD are also planning pension reforms. The coalition agreement promises to keep pension levels at 48 percent of pre-retirement income until 2031. According to IW expert Pimpertz, to achieve this goal, billions of euros will have to be invested due to the aging of society. According to the coalition agreement, this is intended to be done with the help of tax revenues.
Income tax cut and minimum wage increase “uncertain”
Friedrich Merz pointed out that the income tax cut for low- and middle-income earners, which was announced in the coalition agreement, was by no means a done deal. “No, it has not been decided yet,” Merz told the Bild am Sonntag newspaper. Merz said that income tax would be reduced “if the public budget allows it.”
Even the increase in the minimum wage to 15 euros per hour by 2026 has not yet been decided, Merz told Bild am Sonntag. “We have not agreed on this,” Merz said, “but we think that the Minimum Wage Commission is thinking in this direction. There will be no legal automatism.”
The minimum wage in Germany is currently 12.82 euros. Many workers fear that at the end of the CDU/CSU and SPD government term they will have even less money in their pockets due to increased social security contributions and tax cuts./ DW
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