Merz coalition reaffirms 34-measure reform agenda after four-hour chancellery talks

Senior leaders of Germany's CDU/CSU–SPD coalition met at the Federal Chancellery for four hours on the evening of 7 October 2026 and sent a message to lawmakers the following morning reaffirming their commitment to a 34-measure domestic reform programme. Reuters reported the communication on 8 October. Chancellor Friedrich Merz, Finance Minister Lars Klingbeil, CSU leader Markus Söder and the parliamentary group leaders of both coalition partners attended. The statement declared that 'economic growth, secure jobs and social cohesion will be at the heart of the agenda' and acknowledged that 'our democracy is facing a historic test in these times.' The meeting came as the coalition registered record-low approval ratings following the AfD's gains in the Saxony-Anhalt state election on 6 September 2026 and as internal disagreements over the 2027 federal budget sharpened.

A coalition under electoral pressure

The Saxony-Anhalt election provided the immediate backdrop. The AfD's result in eastern Germany exceeded polling expectations, deepening mainstream-party concerns about the durability of the CDU/CSU–SPD Bundestag majority. Bloomberg reported on 7 October that Merz framed the Chancellery talks as an effort to stabilise the coalition through compromise. The four-hour duration — with Söder departing at 22:08 and Merz at approximately 23:00 — reflected the depth of the divisions to be bridged.

A parallel legislative pressure is the 2027 federal budget. The four-day first reading in the Bundestag ran from 8 to 11 September 2026, when Finance Minister Klingbeil introduced the proposal. The 42-member Budget Committee, chaired by Lisa Paus, began ten deliberation sessions on 23 September; its reconciliation session is scheduled for November, with a final plenary vote set for 27 November. The coalition therefore has fewer than eight weeks between the 8 October recommitment and the budget vote.

The July programme the coalition reaffirmed

The message pledged adherence to the 2 July 2026 'Programme for Revival and Employment,' announced by Merz alongside Klingbeil, Söder and Labour Minister Bärbel Bas. Al Jazeera and Euronews reported the full programme when it was unveiled. Its centrepiece is approximately €10 billion in annual income tax relief, effective 1 January 2027, delivered through a higher basic allowance, an increased child allowance and raised child benefit. Earners above €280,000 a year would face a top rate of 47 per cent. The Federal Government estimates a working household with two children earning €60,000 annually would save more than €600 once the reform reaches full effect in 2028.

On pensions, the coalition committed to enacting all 33 recommendations of its government-mandated pensions commission, including a statutory retirement age linked to life expectancy for cohorts born from 1965. For the labour market, telephone sick-note certificates were abolished, replaced by a requirement for a doctor's certificate from the first day of illness; fixed-term employment contracts without objective justification may run for up to 48 months. The total package contains 34 measures.

Legislative calendar and binding constraints

The pension reform is targeted for Bundestag approval by year-end 2026, according to the Federal Government's own communications. The income-tax element requires Bundesrat consent, giving the sixteen Länder governments a formal role in the timetable. On pensions, the 33 commission recommendations go beyond the 48 per cent pension-benefit-ratio floor stabilised until 2031 under a December 2025 Bundestag vote, and include a funded component alongside the existing pay-as-you-go system. The structure of that funded element generated internal SPD resistance in the months before the 7 October meeting.

The 2027 budget itself sets the fiscal frame for all these commitments. Finance Minister Klingbeil presented a total expenditure of approximately €555 billion, roughly €31 billion above 2026. Defence spending exceeds €109 billion, combining an €82.7 billion core allocation with €25.5 billion from the Bundeswehr special fund created by the March 2025 constitutional amendment. Net borrowing in the core budget stands at approximately €118.7 billion, with a further €54.9 billion from the infrastructure special fund — roughly €200 billion in new debt in a single year, a figure the Federal Finance Ministry has presented as consistent with the amended debt-brake rules that exempt the special funds. The coalition's capacity to hold together through the November budget vote will determine whether the reform package clears the Bundestag before year-end.

Sources

• Reuters — German coalition affirms reform agenda amid 'historic test' for democracy
• Bloomberg — Merz's Coalition Commits to Reform Agenda as Popularity Plummets, 8 October 2026
• Bloomberg — Merz Seeks Compromise to Stabilize Coalition as Far Right Gains in Germany, 7 October 2026
• Al Jazeera — German coalition agrees on sweeping reform package in key breakthrough, 2 July 2026
• Euronews — Germany's Merz announces sweeping reforms: Tax cuts, pension overhaul and new sick leave rules, 2 July 2026
• Federal Government — Reforms to pensions, work and taxation
• Federal Government — The Chancellor's policy statement in July 2026
• Federal Government — Bundestag debates the 2027 federal budget
• Federal Finance Ministry — The 2027 federal budget: towards a strong and crisis-proof Germany
• Bundestag — 2027 Haushalt Ablauf (budget schedule, KW34)