A narrow win on pensions is testing Merz' leadership
By forcing through a stopgap reform, the German chancellor is buying time — but leaving long-term sustainability concerns unresolved.
Dear Reader,
In the days before Friday’s Bundestag vote on Germany’s contentious Rentenpaket (pension package), Chancellor Friedrich Merz wasted little time -- or rhetorical restraint.
In internal talks and public remarks in the run-up to the debate, Merz warned that failure by his own party to back the package “would destabilise Germany and Europe.” He cast the vote as an implicit test not only of his authority, but of Germany’s political reliability at a precarious moment. Should the bill collapse, so too could the coalition — handing fresh ammunition to a hard-right, euro-sceptic AfD that is already polling ahead of the CDU for the first time nationwide.
That logic led to a frantic final push. Merz held a series of closed-door meetings with leaders from the CDU and its centre-left coalition partner, the SPD, raced to contain internal rebellions, and personally courted sceptics in the CDU’s youth wing, the Junge Union (JU), urging them to drop their objections and fall into line.
The message was blunt: defeat was not an option.
When the votes were finally counted, the coalition had once again stepped back from the brink — but only just. Merz scraped together the Kanzlermehrheit (chancellor majority) he needed, securing 318 votes in favour against 224 noes, with 53 abstentions, largely from the Left Party. Whether this amounted to a display of authority or a pyrrhic victory — a narrow win that merely delays a deeper reckoning — is a question that will linger well beyond this vote.
The dispute over the pension reform sounds technical at first, but it’s about huge sums of money.
At the core of the package is the Haltelinie, which locks pensions at 48 percent of average wages until 2031. The Junge Union had warned that this “safeguard”, set to cost the government an extra €122 billion by 2039, would saddle younger generations with a disproportionate share of the burden.
The reform also expands the Mütterrente (mother’s pension): parents of children born before 1992 now receive three years of credited child-rearing time, up from the previous six months. Merz also delivered a promise from his much-hyped “autumn of reforms,” granting tax incentives to those who work beyond retirement age.
Yet the package stops short of deep structural overhaul. Big questions — including raising the retirement age and reshaping long-term financing — have been deferred to a future commission, leaving the coalition with a temporary reprieve rather than a lasting solution.
Going forward, Merz will also have to work harder to get his own party on his side: final tallies show seven conservatives voted against the bill while two abstained. In a coalition with a slim majority of only 12 votes in parliament, those are numbers that come perilously close to a rebellion.
What’s the reaction been?
The reform’s passage, all but certain until last week, drew a mix of relief and frustration from coalition members.
Labour Minister Bärbel Bas (SPD) signalled over the weekend that the stage is now set for a broader pension overhaul. “It won’t be enough to just tweak two little screws — we need an entirely new system,” she said. The upcoming commission, to be established before Christmas, will need to tackle “all issues,” from retirement age to who contributes and how incomes are counted.
CDU members, meanwhile, remained circumspect. Alexander Hoffmann, head of the CSU parliamentary group, warned that pension disputes are just a preview of conflicts to come this legislative period.
The reasons, he said, include narrow parliamentary majorities and the pressing need to tackle other major financial challenges such as stabilising health insurance contributions, reforming the heating law, and closing a massive budget gap for 2027.
Christian von Stetten, CDU economic policy spokesperson, put it more bluntly: “My trust in our coalition partner is extremely exhausted after 100 days.”
As a whole, the Junge Union rejected the reform, despite most members being persuaded by Merz to vote for it at the 11th hour.
JU chair Johannes Winkel said that the vote “strengthens the need for further reform” rather than solving the problem.
The fiercest critique came from the hard-right AfD, which pounced on the reform as a reckless “debt-financed” stabilisation of pension levels, rather than a sustainable solution, according to pension spokeswoman Ulrike Schielke-Ziesing.
She added that the government is “buying” a favourable pension level while only digging itself deeper into debt. By the end of 2024, Germany’s government debt stood at €2.69 trillion, according to the Deutsche Bundesbank.
What comes next?
Even before the new commission meets, SPD members are floating ambitious reform ideas. Bas has proposed linking retirement not to age but to years of contributions: someone who starts working at 16 could retire earlier, while later starters, like academics, would work longer.
Tackling politically sensitive topics — such as extending the retirement age beyond 67 or including civil servants and parliamentarians in the statutory system — will be unavoidable if pensions are to become sustainable in the long run, though both parties face internal resistance.
Meanwhile, Finance Minister Lars Klingbeil (SPD) has outlined plans to overhaul private retirement savings, replacing the widely criticised Riester pension and giving low- and middle-income earners a better shot at maintaining their standard of living.
Realistically, before any of these measures take effect, Germany’s coalition is likely in for another round (or five) of infighting.
Rachel’s take
Merz deserves credit for one thing: getting the bill passed on schedule, or by the end of 2025, as he originally promised. No pension reform will ever satisfy all interests and, by forcing the issue now, Merz put a stopgap in place before delay turned risk into crisis. The Scholz government already failed to avoid this fate when internal divisions ultimately tore its coalition apart last year.
Dragging the fight into the new year would have undermined Merz’s authority early in his term and sent the wrong signal to voters and coalition partners alike. The reform leans heavily on federal funding and postpones structural correction, but it buys political and fiscal time.
At the same time, the JU emerged with greater visibility and agenda-setting influence despite losing their immediate battle. Their warnings on intergenerational fairness and long-term sustainability are now squarely embedded in the public debate. Without follow-up reforms — addressing pension formulas, tying retirement age more closely to life expectancy, and diversifying financing beyond government budget transfers — the system risks becoming fiscally untenable.
In other words: the showdown is not over, it has merely been postponed. Merz’s real test will be whether he uses this respite to pursue deeper, politically painful reform — or leaves the hard choices for the next crisis.
News In Brief
🇮🇱 During his first official trip to Israel on Sunday, Chancellor Merz met with Israeli Prime Minister Benjamin Netanyahu and reaffirmed that Germany will “always stand by” Israel’s right to exist and its security — though he notably avoided using the term “Staatsräson” to describe Germany’s responsibility for the Jewish state’s security. Merz butted heads with Netanyahu as he called for renewed humanitarian aid to Gaza, backed a two-state solution, and warned against annexations in the West Bank. The two still managed some degree of diplomacy: Netanyahu said he’d be happy to pay Germany a visit if not for the “outrageous“ arrest warrant issued against him by the International Criminal Court.
🚆 Seeing is believing? Germany’s state-owned Deutsche Bahn is promising a noticeable reset after years of passenger frustration over delays and dirtiness. This week its new boss Evelyn Palla announced a Sofortprogramm (rapid-action plan) focused on cleaner trains, safer stations and more basic reliability. Trains are to be cleaned more frequently — even during journeys — and customers will be able to count on functioning onboard toilets (what luxury!) and bistros. Security will also be boosted at major stations, where joint patrols of Bahn security staff and police are meant to make travellers feel safer. Punctuality will slowly be improved, said Palla, although she admitted that the main goal for now is simply to stop it getting worse.
🏙️ Initially, Chancellor Merz refused to take back his infamous “Stadtbild“ comments. But on Monday evening he told public broadcaster ARD that “I should have said earlier what I concretely meant” — that Germany needs immigrants, but only the ones “who follow the rules.” He called for more migration in “the whole medicine sector, the care sector, and other fields,” in which Germany is experiencing a desperate shortage of skilled workers. He acknowledged flaws in his approach to public communication, saying the past few months had been turbulent and that he was “not yet satisfied” with what his government had accomplished.
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Sincerely,
Rachel Stern