State Election Setbacks Threaten Chancellor Merz’s Tax, Pension and Health Reforms

Recent state elections in eastern Germany delivered significant losses for the governing CDU-SPD coalition, raising doubts about Chancellor Friedrich Merz’s ability to push through his ambitious reform program. After exit polls signaled the worst-ever result for his conservatives, Merz pledged to stay in office to deliver tax, pension and health changes, but SPD strategists now demand a “German New Deal” and a policy overhaul.

The coalition’s €2.5 billion tax cut and proposed early-retirement reforms have faced backlash, especially in the east where lower savings make the changes more painful. Regional premiers from both parties have urged scrapping the early-retirement option, and public trust in Merz has fallen to historic lows. Analysts warn that revisiting the summer-approved package could delay needed reforms and undermine investor confidence, while the AfD’s near-30 % support underscores the political volatility.