German coalition backtracks on taxes, welfare in budget talks, senior lawmakers say

German Coalition Backs Off on Tax, Welfare Changes in 2027 Budget Talks

Key Developments in Germany's 2027 Federal Budget Negotiations

(Refiles to remove word senior from description of centre-left SDP partners in paragraph two)

Coalition's Revised Stance on Tax and Welfare Reforms

BERLIN, Nov 11 (Reuters) - German Chancellor Friedrich Merz’s governing coalition backtracked on some contentious tax and welfare reforms on Wednesday, postponing a tax on sugary drinks and shelving a plastic levy, according to a joint statement from three senior lawmakers.

Merz’s conservative CDU/CSU bloc and its centre-left SPD partners are this week resolving the last remaining issues for the 2027 half-trillion-euro federal budget.

Postponed and Shelved Tax Measures

• The tax on sugary drinks will be introduced in 2028 instead of mid-2027.
• A planned tax on plastic packaging will not be introduced for now.

Electricity Tax Cut and Welfare Adjustments

• Lawmakers have not found funds to finance a planned electricity tax cut for all consumers, a plan that Merz in particular had championed. Some business sectors already enjoy the European minimum tax rate of 0.05 cents per kilowatt-hour.
• The coalition agreed to reverse some planned welfare cuts, including payments for low-income parents.

Background and Economic Context

2027 Federal Budget Proposal

• The government earlier this year proposed a 2027 federal budget worth €555.4 billion ($616 billion) to parliament.

Economic Recovery and Defense Spending

• Germany is trying to help its economy recover from war-related energy shocks and ramp up defence spending after decades of under-investment.

Exchange Rate Reference

($1 = €0.9018)

Reporting Credits

(Reporting by Thomas Seythal; editing by Lincoln Feast.)