Government starts turbo relief: 500 billion for recovery!

Government starts turbo relief: 500 billion for recovery!

The new coalition between the Union and the SPD is pursuing ambitious plans to ease the burden on the German economy. Chancellor Friedrich Merz (CDU) has announced that the first decisions will be made before the summer holidays in order to stimulate the economy. After two years of recession and a stagnating economy, the situation is challenging. Targeted measures are therefore necessary to counteract the pressure, especially from business associations. They criticize high energy costs, taxes and lengthy approval processes.

The focus of the proposals is on better tax depreciation options for investments and suggestions for reducing bureaucracy. In addition, legal regulations are being considered for a loan-financed special fund of 500 billion euros, which will help finance infrastructure projects and climate protection initiatives. SPD leader Lars Klingbeil describes this project as an immediate program that must be implemented quickly. CSU boss Markus Söder also calls for visible progress by the summer.

Planned tax relief

As part of the coalition agreement, which was agreed on April 9, 2025 under the title “Responsibility for Germany”, comprehensive tax relief is provided for. From 2025, an “investment booster” with a declining depreciation rate of 30% is to be introduced for new equipment investments. Corporate tax will be gradually reduced from 15% from January 1, 2028. Improvements are also planned for partnerships, particularly with regard to option models and retention benefits.

A notable point is the intended increase in the minimum trade tax rate from 200 to 280 percent, as well as measures against bogus relocations to trade tax havens. The planned reduction in income tax for small and medium incomes is also being discussed, as is a reduction in the gap between child allowances and child benefit.

Investments and social measures

In addition to tax relief, social measures should also be taken into account. For example, an increase in the single parent relief amount is being sought, along with tax incentives for overtime and tax-free overtime pay. The relief from energy-related renovations in inherited properties is also part of the plan. Furthermore, improvements are planned for the financial situation of single parents, the re-increase of the trainer allowance and changes to the distance allowance.

Changes in sales tax policy, such as the permanent reduction of the sales tax rate for food in the catering industry to 7%, as well as the strengthening of non-profit status by increasing the exemption limit for commercial businesses are further elements of the coalition agreement. All of these measures are designed to stimulate investment and the creation of new jobs.

The coalition committee, the central body for planning and implementing these measures, will meet regularly in the future. The last meetings of the Bundestag and the Bundesrat before the summer break are scheduled for mid-July, which increases the time pressure to make timely decisions.

The coming months could be crucial for how Germany emerges from the current economic slump. The combination of tax and social measures could play a key role.