Like many Western European countries, Germany has an aging population that must be looked after in retirement, but which is also a major voting block, especially for the two main coalition parties – the SPD and the CDU.
The parties had agreed on pension reform in their coalition agreement that would lock pensions at 48% of average earnings until 2031.
Another important aspect is the introduction of “active pensions” which aims to encourage pensioners to keep working voluntarily.
But it is the cost of pensions that has caused a rift within the coalition government, with 18 Young Union members of the Bundestag threatening to vote against the reform. The government has a majority of only 12 seats.
The plan to keep pensions in line with income is expected to cost the state €11 billion ($12.77 billion) by 2031 and up to €15 billion a year thereafter if the pinned rate rises, which the SPD wants.
The coalition has refused to make changes to the reform to appease rebel lawmakers, but Merz has offered to discuss even deeper reforms to the pension system after 2031.
On Monday, Young Union continued to say it could not vote in favor of the bill, but stopped short of a full revolt, saying each member could vote independently.
On Tuesday, the union is set to discuss the legislation and hold a test vote to see if they have the numbers before Friday’s actual vote.
SPD co-leader Barbel Baas has said that a failed vote could block all further legislation and jeopardize Merz’s government.