There are weeks of conflict behind the black-red coalition: first the SPD announced that it wanted to renegotiate the care reform, then there was resistance from the Chancellery against the planned sugar tax. The fundamental problem: The government has little financial leeway, while at the same time the pressure to relieve citizens and secure social benefits is growing.
In the meantime, the tensions apparently became so clear that, according to information from Spiegel, Federal President Frank-Walter Steinmeier intervened.
Where was the last crunch?
On Thursday, the sugar tax made headlines - again. After the SPD-led Finance Ministry came under criticism at the end of August because a sugar tax for some sugar-free drinks was initially being discussed, Finance Minister Lars Klingbeil's draft law has now attracted criticism from the Chancellery.
A government-appointed commission had originally recommended a staggered sugar levy. This could generate annual revenue of around 450 million euros from 2028, according to the Commission's calculations.
But Finance Minister Klingbeil proposes significantly higher staggered taxes in his draft law. This would result in a good 795 million euros flowing into the coffers every year. That could ease the burden on the strained budget. However, the greater burden on the food industry and consumers met with resistance in the Chancellery. Now it needs to be reworked.
And what about nursing care reform?
The positions on the nursing reform also initially differed. The SPD announced that it would not agree to the draft in the form written by Carsten Linnemann (CDU). The Social Democrats reject cuts in benefits and want to limit the personal contribution of those in need of care to 1,500 euros.
After several intensive rounds of talks, the cabinet surprisingly reached an agreement on Wednesday. The draft has been weakened and the nursing care funds are to be stabilized in the short term. A fundamental reform, however, has been postponed until next year and will initially be prepared by a commission of experts.
One thing is clear: care must be financially stabilized, while at the same time benefits should be maintained and additional burdens on citizens should be limited. How this can come together remains an open question. A commission should now decide that.
Was the agreement reached by the Federal President?
That is unclear. Der Spiegel reports that the Federal President is said to have intervened on Tuesday - one day after the talks on care reform. Frank-Walter Steinmeier called Interior Minister Alexander Dobrindt (CSU) and SPD leader and Finance Minister Klingbeil. Apparently it was about his concern about the continued existence of the coalition, writes Der Spiegel. Details of the discussions are not known. So it's unclear how big the impact of the phone calls was.
Why is the coalition in such a difficult position?
One of the main reasons is the lack of money. According to the Federal Statistical Office, there was a deficit of 98.8 billion euros in public budgets in the first half of the year. The federal government had by far the largest share in this. Its financing gap rose to 72.3 billion euros - more than twice as much as in the same period last year.
According to the Federal Office, two relief measures contributed to the deficit: the reduction in electricity tax for manufacturing and agriculture and the reduction in the energy tax on fuels. In addition, there is a collapse in tobacco tax revenue after the increase.
The budget situation is unlikely to ease in the foreseeable future: the new “fuel discount” will cause loss of income, and there will also be another short-term loan of up to 700 million euros for nursing care insurance.
What else is putting pressure on the government?
In addition to the financial problems, there are long-term challenges. The aging population is increasing the pressure on social insurance, while at the same time the federal government must respond to the economic consequences of international crises and finance its announced reforms.
Dwindling trust among the population is also causing nervousness in the coalition. In the current ARD-DeutschlandTrend, only ten percent said that they were satisfied with the work of the federal government and the Chancellor's performance - both of which are historic lows. More than three quarters say they are already feeling more and more stress. Around one in two people even fear that they will not be able to maintain their standard of living.
This presents the federal government with a dilemma: on the one hand, it has announced that it will significantly relieve the burden on people in Germany, but on the other hand, there is no money in the budget. Many of the planned reforms are accompanied by cuts or additional burdens and these are causing resistance - partly from the population, partly also from the coalition parties Union and SPD.
What happens next?
The agreement on care initially provides some relaxation. However, there are still no solutions to many fundamental questions. The focus remains on the budget. The budget for 2027 is scheduled to be passed on November 27th.
Even before then, the planned income tax reform is likely to cause new disputes. The first reading in the Bundestag is next week. The Union criticizes Finance Minister Klingbeil's relief plans, among other things, because in their view they do not go far enough. The SPD, in turn, is prepared to talk about further relief - but only if the counter-financing is also clarified.
Financial politicians in the Union, in turn, want to enable greater relief from income tax reform through spending cuts in the federal budget. But the budget is already on edge.
And according to information from Handelsblatt, there is apparently a threat of a new blockade in the income tax reform. The Union faction wants to increase the pressure on Federal Labor Minister Bärbel Bas (SPD) to advance reforms in the labor market and pensions. A suggestion from the parliamentary group leadership is: Only when Bas presents draft laws will the income tax reform be approved.
The core question between the SPD and the Union remains: How much relief can the state afford for its citizens - and above all where, if savings have to be made in many areas?
