The German governing coalition is poised to unveil a package of measures this Thursday intended to stimulate the struggling economy and mitigate the ongoing crisis. The proposals, heavily influenced by the conservative Union faction, center on alleviating pressure on energy-intensive industries and supporting small and medium-sized enterprises (SMEs).
According to Jens Spahn, parliamentary group leader of the Union, a key focus will be reducing electricity prices. “We must primarily help the energy-intensive industry and the Mittelstand. Electricity prices need to come down” Spahn stated in an interview with “Tagesspiegel”. Expected measures include the implementation of an industrial electricity price model and the potential reactivation of natural gas power plants to ensure affordability.
However, Spahn acknowledged the coalition’s difficulties in significantly shifting public and business sentiment despite prior legislative decisions. He tempered expectations, stating, “It takes time for something to noticeably change in everyday life”. He referenced existing plans for corporate tax reductions and bureaucratic streamlining, while conceding the limited immediate impact – as exemplified by the persistent challenges faced by those searching for housing despite the government’s proclaimed construction boom.
Describing the coalition agreement as an “emergency program for the first year in government” Spahn suggested that further interventions are anticipated beyond those initially outlined. He specifically identified Germany’s current social security contribution rate, hovering at 42.5% of gross wages, as a substantial burden on the economy. He indicated that social security reforms will be pursued once the appointed commissions deliver their findings, signaling a timeline extending into the first half of 2026.
Notably, a decision on pension reform is not anticipated at this week’s meeting. Younger members of the Union faction have reportedly voiced concerns regarding the potential burden on future generations, threatening to obstruct progress. “The Chancellor has made it very clear that there is still more to be said about that within the coalition” Spahn explained, indicating a deferral of this contentious issue. The delayed action highlights the challenges of navigating internal coalition dynamics amidst mounting economic pressures and diverging ideological viewpoints. The upcoming measures, while presented as economic relief, are likely to fuel debate regarding the long-term sustainability of German economic policy and its equitable distribution of burdens.
