Marcel Fratzscher, the head of the German Institute for Economic Research (DIW), welcomed the government’s comprehensive reform package but stressed that it should not be viewed as a major economic breakthrough. According to Fratzscher, the package is more of a symbolic measure than a transformative one and will not deliver the necessary momentum for growth and competitive strength to the German economy.
He characterized the reforms as a compromise rooted in limited political ambition, highlighting the significant internal divisions within the federal government. The DIW President noted that the package ostensibly aims to achieve three things: providing relief to the middle class, increasing flexibility for businesses, and adopting a firmer policy on the social state.
However, Fratzscher heavily criticized the tax reform component, calling it unambitious and unfunded. While acknowledging that it offers some assistance to families and middle-income earners, the top economist pointed out that the largest absolute monetary benefit accrues to higher earners who fall below the threshold for the “rich tax.” For genuine support to small and medium-income citizens, he argued, greater focus should be placed on adjusting social contributions, implementing transfers, or increasing employment subsidies-areas where the current package is largely lacking.
Regarding taxing the wealthy, Fratzscher explained that the Union party secured its interest by pushing through an increase in the rich tax rate starting at €250,000 annually. He maintains that this adjustment is largely symbolic and will generate only minimal additional revenue for the state.
