German Coalition Leaders Seek Unity Over Economic and Welfare Reforms
Coalition Struggles and Economic Challenges in Germany
By Markus Wacket
BERLIN, May 5 (Reuters) - Party leaders in German Chancellor Friedrich Merz's struggling coalition pledged on Tuesday to try to bridge differences over tax, welfare and health reforms after weeks of wrangling that have cast a shadow over the government's future.
As the first anniversary of Merz's appointment as chancellor approaches on Wednesday, his approval ratings and support for his conservative Christian Democrats (CDU) and the centre-left Social Democrats (SPD) have sunk to record lows.
Declining Trust and Political Fallout
"There's no point in trying to get around it: trust in politics has declined," finance minister and SPD leader Lars Klingbeil told reporters. "The dispute, and particularly the heated debate of recent weeks, has also done us harm as a coalition and as a government."
Economic Recovery and External Pressures
After two years of recession, Germany's economy returned to growth at the end of last year but the fragile recovery risks being snuffed out by an energy shock from the war with Iran and new U.S. tariffs targeting carmakers that are already struggling with stifling competition from China.
Economic Competence Questioned in Opinion Poll
Opinion polls put the far-right Alternative for Germany (AfD) party up to 5 points ahead of the CDU, with the SPD battling the opposition Greens for third place after disastrous results for the party in two state elections this year.
According to a survey to be published in the business daily Handelsblatt, 73% of Germans doubt Merz's economic competence, previously an area seen as one of his main strengths.
Reform Stalemate and Internal Disputes
Merz came to power a year ago, pledging to rebuild Germany's depleted armed forces after decades of neglect and overhaul pensions, tax, welfare and health spending to ease growing pressure on public finance.
But the long-promised reforms have been held up by disputes between the SPD and CDU over tax levels, spending priorities and welfare, with each side accusing the other of failure to compromise.
Government Hails Fall in Immigration
Opposition from within Merz's own party led to a climbdown over pension reforms at the end of last year, as he agreed to appoint a special commission to consider fresh proposals as part of the price for avoiding a defeat in parliament.
Unresolved Issues and Future Challenges
But key issues including retirement age, contribution rates and benefit levels are still undecided.
The statutory health insurance system, facing funding deficits expected to balloon to tens of billions of euros in coming years, must also be agreed as well as long-promised tax reforms to incentivise employment and encourage investment.
Achievements Overshadowed by Controversy
The government has pointed to a sharp rise in defence spending and a steep fall in irregular immigration and asylum approvals over the past year as significant achievements. But the sickly state of the economy and wrangling over reforms have dominated other issues.
"Many of our achievements have been overshadowed by too much public controversy and squabbling, particularly in the weeks since Easter," said CDU parliamentary leader Jens Spahn.
"We must and want to break free from it and return to working together within this coalition," he said.
(Writing by James Mackenzie; Editing by Alison Williams)
