Expanding welfare state reforms debated: Merz advocates for eliminating financial burdens on citizens

In a move aimed at addressing the financial sustainability of the social system, the coalition government in Germany has announced plans for several laws focused on social system reforms, set to be introduced in the fall of 2025.

The decision to maintain the basic rates of Citizen's Income at their current levels in 2026 was announced, with singles receiving 563 euros per month, and children between 357 and 471 euros, depending on their age. This decision comes after significant increases in 2023 and 2024, intended to offset high inflation.

However, the decision not to increase the rates has sparked debate among coalition leaders. Armin Laschet, a coalition leader, expressed concerns about the financial affordability of the current system, stating that politics has been living beyond its means. His statement was met with criticism from the German Social Association and Olaf Scholz, another coalition leader, who called Laschet's statement "bullshit."

Scholz, along with the Union and SPD factions, has agreed on a plan that includes changes in the mechanism, as outlined in the coalition agreement. The goal is to ensure that health, long-term care, and pension insurance remain capable of performance and not overwhelmed in the future.

The government commission on reforming the social state will begin its work on Monday and is expected to submit proposals by the end of the year. The commission, formed by the CDU/CSU and the SPD, will work together through a Social State Commission starting September 1, 2025, to develop and implement these reform proposals.

Stricter guidelines are also being planned for Citizen's Income recipients, including larger deductions for missed appointments without good reason. The employers' association Gesamtmetall has called for these reforms, stating that they are overdue given the long economic crisis and the high amount of social spending.

The plan for no increase in Citizen's Income rates in 2026 needs to be approved by the cabinet. The leaders of the Union and SPD factions had agreed on this plan with proposals to be implemented after the summer break at a retreat in Würzburg.

The standard need amounts for Citizen's Income will remain unchanged on January 1, 2026, due to a legal continuation mechanism. It is worth noting that a zero round for Citizen's Income, intended to secure the subsistence minimum, was expected in 2025, and has already been implemented.

The coalition's announcement of social system reforms has sparked debate and anticipation, with the Chancellor making clear that these reforms will involve painful decisions and cuts. Laschet, however, remains determined to pursue these changes, blaming politics for living beyond their means and stating that changing this path will be a difficult but necessary step.