Coalition talks resume after regional election defeats

Chancellor Friedrich Merz addressed an audience hosted by Handelsblatt and WirtschaftsWoche in Berlin on Wednesday before convening the coalition committee for its first meeting in more than three months. The session brought together leadership from the CDU/CSU Union and the Social Democratic Party (SPD) following losses in three September state elections, where the Alternative for Germany (AfD) won in Saxony-Anhalt and Mecklenburg-Vorpommern while both governing parties recorded poor results in Berlin. Merz reiterated that the coalition agreement and the reform package approved in July remain the fundamental basis of the federal government. While several SPD officials called for revising the planned social reforms following the electoral setbacks, Merz rejected altering the core agreement. Union parliamentary group leader Thorsten Frei and SPD counterpart Matthias Miersch both affirmed their intent to negotiate the sequence of legislative work over the coming weeks.

Pension disputes and shifting timelines

Coalition faction leaders had agreed during a retreat in Münster in late August to pass the entire reform agenda through the Bundestag by the end of 2026. Merz revised that timetable on Wednesday, stating that while he does not expect complete adoption before Christmas, he aims to conclude the process in spring 2027. Negotiations remain stalled primarily over statutory pension adjustments, with the SPD challenging plans to abolish deduction-free retirement after 45 contribution years. Labor Minister Bärbel Bas is finalizing draft legislation intended to introduce hardship exemptions for individuals with physically demanding careers. Merz described the pension overhaul as the most important domestic measure of the legislative term, highlighting its inclusion of individual capital accumulation alongside statutory coverage.

“I assume that the coalition agreement and the reform package decided in July remain the unchanged business basis for the work of the coalition.”

Care insurance commission faces delay

Tensions within the coalition also affected elderly care policy on Wednesday as the federal cabinet postponed the establishment of an expert structural commission until next week. Deputy government spokesperson Sebastian Hille cited last-minute consultation requirements, while SPD parliamentary director Dirk Wiese pointed to unresolved questions regarding the commission's composition and mandate. The SPD insisted that the panel examine a cap on nursing home costs and a risk structure equalization between private and statutory care schemes. Health Minister Carsten Linnemann rejected an absolute cost cap as financially destabilizing, proposing instead to review tenure-based benefit supplements while confirming that private-to-statutory equalization would be included in the panel's review.

“If the care system is not fundamentally restructured, it will collapse in the thirties.”

Broader social insurance pressures

The coalition decided last week to divide the care reform into two distinct phases, initially passing measures to avert immediate contribution rate increases before tasking the commission with long-term structural changes. Linnemann expects the expert group to present its findings by the end of January, aiming to implement structural legislation on 1 July 2027. Outside organizations criticized the political deadlock, with Eugen Brysch of the Deutsche Stiftung Patientenschutz describing the inability to establish the commission as a tragedy. Concurrently, the statutory health insurance system covering 74 million individuals faces mounting cost pressures, with the monthly contribution assessment ceiling scheduled to rise by 300 euros at year-end and a separate health expert commission preparing efficiency proposals for December.