Germany prepares for the "autumn of reforms"

BerlinThe "autumn of reforms" that he has promised every time most unpopular German Chancellor Friedrich Merz It's already underway. "Our country faces important decisions this fall," he warned this week during the general debate on the 2025 budget in the Bundestag, the lower house of the German Parliament. The country, traditionally the economic engine of the European Union (EU), is struggling to get going after two consecutive years of recession. Gross domestic product (GDP) has decreased by 0.3% in the second quarter of this year compared to the first three months of the previous year, due in part to the turbulence in global trade. In August, the three million mark was surpassed, a figure unprecedented since February 2015.

According to Merz, the most populous state in the Union is currently facing three major challenges: freedom is threatened by attacks on the democratic order; social cohesion is being "openly questioned" by domestic and foreign political forces; and Germany's export-oriented economic model is under severe pressure from protectionism, high energy prices, and a wave of new technologies.

"Germany is a democratic, constitutional, economically prosperous, and socially responsible country," the Chancellor emphasized. "We want to remain exactly what we are," he added, but to make this possible, he warned that "bold reforms" are necessary, especially with regard to Germany's generous social protection system. "Reforms are inevitable," since the future of Germany and its welfare state are at stake, the chancellor warned. Merz specifically mentioned reforms to the pension system, public health insurance, and basic income.

"We must change the structures. We must reorganize things so that they continue to fulfill their function in the future," warned the chancellor, who explained that "the so-called autumn of reforms began some time ago." The Merz government, which considers greater investment essential, has, for example, implemented the first major reform of corporate taxation in fifteen years with the aim of increasing investment.

Impacting social benefits

Merz seeks to convince Germans of the need for pension reform. The chancellor believes that the pension system's generational pact (workers finance retirees) must be reconsidered so that younger generations do not bear the entire burden of pensions. The government has presented a reform to address the aging population and the system's deficit.

The initiative provides for the so-called active pension, which would allow retirees to continue working and earn up to 2,000 euros per month tax-free without losing their benefits. It also includes the early retirement, which involves starting to save from childhood with public contributions to a private fund. The goal is to extend working life and reduce pressure on the public coffers. Supporters highlight its flexibility and the boost it provides to savings. Critics, however, warn of the fiscal cost and the inequality between those who can work later in life and those who cannot. Furthermore, the basic income will be transformed, and plans are also being made to reduce health insurance.

From the Bundestag, Merz called on Germans to support reforms to the coalition that he chairs, formed by the conservatives of the CDU-CSU and the Social Democrats of the SPD. "There is no time to lose. Our country must now feel that things are improving, that long-known problems are being seriously addressed," stated the conservative leader. He also asked Germans to be patient with the reforms, which are only the beginning. "The autumn of reforms will not be the last season in which we change the country for the better. A winter, a spring, and another autumn of reforms will follow." The theory is that when the reforms take effect, "many other positive impulses will follow [and] then the strength that exists in this country will manifest itself again," the chancellor promised, addressing those who remain skeptical or reluctant to change.

As expected, Merz did not convince the opposition. Heidi Reichinnek, co-chair of the Left Party (Die Linke) parliamentary group, predicted that Germans will face an "autumn of social cruelties." It remains to be seen whether citizens are willing to tighten their belts this time or whether the social cuts will eventually take their toll on the head of government, as happened to Social Democrat Gerhard Schröder, chancellor of Germany from 1998 to 2005. The reforms he pushed through sparked widespread public discontent after governing for sixteen years.