Merz Proposes Cuts to Child Benefits, Targeting Specific Groups

In a significant policy shift, Friedrich Merz, anticipated to lead as Chancellor, has revealed potential modifications to Germany's child benefit system. Discussions surrounding these changes have emerged even before the official announcement of the electoral results. The proposed adjustments could impact various social benefits, including pensions aimed at encouraging seniors to remain in the workforce.

Merz's plans for child benefits suggest that while there may be an increase in child allowances, certain categories of recipients could face reductions. The Christian Democratic Union (CDU) and the Christian Social Union (CSU), in their election manifesto, initially pledged to raise child benefits and adjust the child tax allowance to align more closely with the parents' basic tax allowance. However, the party did not clarify how these increases would be financed.

One key aspect of the proposal is the adjustment of child benefits for families residing outside Germany. The CDU/CSU aims to link the child benefits paid for children living abroad to the cost of living in those respective countries. This means that if the cost of living in a foreign country is lower than in Germany, the child benefit amount could be reduced accordingly. This adjustment could potentially lead to cuts in benefits for families living outside Germany, particularly in Eastern European countries, where many German expatriates reside.

In 2023, Germany disbursed approximately EUR525.7 million in child benefits to families living abroad, with Poland receiving the highest share of these funds. As of January 1, 2025, child benefits were increased by EUR5, bringing the total monthly allowance to EUR255 per child. This increase was part of a broader agreement among the previous coalition government.

As the new government prepares for coalition negotiations, the child benefit issue may become a contentious point. The Social Democratic Party (SPD) has voiced its commitment to implementing a child basic income that aims to provide all children with opportunities for a prosperous upbringing. This initiative seeks to simplify financial support for families, particularly those with lower incomes, and may complicate discussions with the CDU/CSU regarding proposed cuts.

Moreover, the SPD has emphasized the importance of stabilizing the pension level, making it a central element of their agenda. They propose maintaining the pension level at 48% of the average income, which could clash with the CDU's plans that encourage seniors to work while receiving pension benefits.

In summary, as Merz's government prepares to take shape, the discussions around child benefits and pensions signal potential shifts in social policy that could affect a wide range of families across Germany, particularly those with children living abroad.