As coalition negotiations progress, the leaders of four political parties are set to convene once again to address key points of contention. Following the involvement of 256 experts across 16 working groups who sought compromises, the focus now shifts to resolving outstanding disputes.

In Berlin, nearly five weeks post-election, discussions between the Union and SPD parties are entering a decisive stage. A group of 19 negotiators, including the party leaders Friedrich Merz (CDU), Markus Söder (CSU), Lars Klingbeil (SPD), and Saskia Esken (SPD), will tackle the more challenging issues starting today. The objective is to conclude negotiations by Easter in three weeks, with a new cabinet potentially being sworn in at the Bundestag in early May. However, several topics remain unresolved, including military conscription, the future of combustion engine vehicles, and pension policies.

Key Areas of Dispute Taxation

The working group on budget and taxation has presented numerous contentious issues to be decided by the leadership team. For instance, the timeline for implementing the agreed corporate tax reform, aimed at enhancing Germany's competitiveness as a business location, is under debate. The Union advocates for a reduction in corporate taxes by 2026, while the SPD prioritizes improved depreciation modalities and seeks minimal adjustments until 2029.

There are indications that the top tax rate may only apply to higher incomes, although the SPD intends to raise it from 42% to 47%. Additionally, the SPD is proposing an increase in tax on capital gains and, notably, a reintroduction of a wealth tax, which the Union opposes.

In terms of inheritance tax, the parties have diverging strategies: the Union seeks to raise exemptions for family members, while the SPD aims to scrutinize exemptions for business inheritances, aiming for increased tax contributions from heirs.

Migration

The issue of asylum seeker rejections at borders represents a significant point of contention, with only a formulaic compromise reached in preliminary discussions. The current proposal allows for rejections "in coordination with our European neighbors," but interpretations of this agreement vary, particularly regarding whether neighboring states merely need to be informed or must consent.

The working group has yet to determine if the incoming government will accommodate the Union's demand to conduct asylum procedures outside the EU. Furthermore, the Union negotiators wish to tighten citizenship laws contrary to SPD views, proposing that citizenship could be revoked from individuals involved in terrorism, anti-Semitism, or those advocating the dismantling of democratic principles if they hold another nationality.

Pensions

While the Union and SPD have reached a consensus in exploratory discussions to secure the pension level, disagreements persist regarding the specific rate. The SPD advocates maintaining the current level at 48%, which would likely necessitate higher contribution rates. Conversely, the Union proposes a plan to extend the required contribution period from 45 to 47 years, according to a document outlined by the working group.

Defense and Military Service

The Union is pushing to reinstate mandatory military service, which was suspended in 2011 after 55 years of implementation, as a solution to personnel shortages in the Bundeswehr. Meanwhile, the SPD maintains its stance on voluntary service and advocates for a broader societal discussion regarding the introduction of a new military service model.

Financial Matters for States and Municipalities

The SPD insists that the federal government should take on half of the historical debts of financially struggling municipalities. While the CDU appears amenable to this proposal, the CSU opposes it, likely due to the relatively stable financial situation of many Bavarian municipalities. The CSU is keen on reforming the state financial compensation system, seeking to alleviate the financial burden on donor states like Bavaria, a stance the SPD contests, deeming the current system appropriate.