German Chancellor Friedrich Merz's governing coalition has backtracked on some of its most contentious tax and welfare reforms as it finalizes the 2027 federal budget, postponing a tax on sugary drinks and shelving a planned levy on plastic packaging, according to a joint statement from three senior lawmakers.
The tax on sugary drinks, due to take effect in mid-2027, will now be introduced in 2028 instead. The government had estimated it would raise about 805 million euros in 2027 and about 1.5 billion euros a year thereafter, according to Euronews. A planned tax on plastic packaging will not be introduced for now.
Lawmakers also said they had not found the money to finance a planned cut in the electricity tax for all consumers, a measure Merz in particular had championed. The coalition agreed to reverse some planned welfare cuts, including payments for low-income parents, and left pensions and parental allowance untouched.
Merz's conservative CDU/CSU bloc and its senior centre-left SPD partners are this week resolving the last remaining issues for the 2027 federal budget, which the government proposed earlier this year at 555.4 billion euros ($616 billion). The budget is due to be finalized in the coming weeks.
