Merz Casts Doubt on Minimum Wage and Tax Cut Agreements

In a significant development just before the SPD's member vote on the coalition agreement, Friedrich Merz, the leader of the CDU, expressed skepticism about certain key points that have been perceived as settled. He specifically questioned the certainty of the proposed increase in the minimum wage to EUR15 and the planned reduction in income tax for small and medium-sized enterprises, stating that these issues are not guaranteed and will depend on the public budget.

Last Wednesday, the Union and SPD parties reached an agreement on a coalition contract, with the CSU being the first to approve it the following day. The SPD, which considers many aspects of the agreement a victory, will conduct a member vote starting Tuesday.

Merz, who is seen as a likely candidate for the chancellorship, highlighted his doubts in an interview, noting that there would be no automatic implementation of the proposed measures. He clarified that while the coalition's intention is to lower income tax when the budget allows, no definitive commitments have been made regarding the specifics of the minimum wage increase.

According to Merz, the coalition did not agree on a fixed timeline for the minimum wage hike, contrary to claims made by SPD leader Lars Klingbeil. He emphasized that while there is an expectation from the minimum wage commission to consider the increase, it will not happen automatically and will require their independent assessment.

The current minimum wage, set by the government based on recommendations from the independent commission, stands at EUR12.82. The coalition agreement asserts support for the legal minimum wage and indicates that the minimum wage commission will consider various factors in its future determinations, potentially paving the way for the EUR15 minimum wage by 2026.

The outcome of the SPD's member vote is expected to be announced on April 30, with the CDU's Federal Committee scheduled to approve the coalition agreement on April 28.

Merz reiterated that the planned tax cuts were also not finalized, stating that while the coalition aims to reduce income tax for lower and middle incomes by mid-term, the details remain unspecified. He pointed out previous disagreements within the coalition regarding these issues, which led to the current ambiguity.

Concerns have been raised regarding the financial implications of the coalition's social policies, with experts warning of potential increased burdens on taxpayers. The Institute of the German Economy (IW) cautioned that the coalition's social initiatives could lead to serious financing challenges, especially as social contributions have already risen significantly.

Amidst these discussions, the CDU and SPD have previously established a comprehensive financial package, including adjustments to the debt brake for defense spending and significant investments in infrastructure and climate initiatives. However, Merz stressed the need for fiscal consolidation and the importance of creating budgetary flexibility for future reforms.

In response to the ongoing debate, SPD General Secretary Matthias Miersch has been vocal about the necessity of tax relief for lower and middle incomes, emphasizing the party's commitment to implementing a comprehensive income tax reform by 2027.

Critics, including leaders from the Green party, have expressed concerns over the perceived lack of clarity and direction in the coalition's agreements, questioning how the public can understand the government's intentions when key aspects are subject to interpretation before final approval.