Merz coalition unveils €10 billion tax relief package in Germany

German Chancellor Friedrich Merz’s coalition has agreed a broad reform package that economists and business leaders say could strengthen investment, jobs and competitiveness in Europe’s largest economy if it is implemented quickly and in full. The package combines €10 billion in annual tax relief for lower-income earners, more flexible labour laws, pension changes, housing and infrastructure measures, anti-fraud steps and bureaucracy cuts, with parliament expected to pass the individual measures by the end of the year. Merz said an average family would receive €600 in tax relief, partly financed by raising the top tax rate to 47% from 45% for annual income of €280,000 or more. Economists said the reforms could help lift Germany’s weak trend growth, with Berenberg’s Holger Schmieding estimating it could rise from 0.4% to 0.7% a year, though ING’s Carsten Brzeski cautioned that the package would not quickly turn stagnation into a boom and that the benefits would take time to materialise.