Merz Pushes Economic Overhaul, Faces Labor Resistance

New Economic Plan Targets Growth Through Deregulation

Germany’s federal government has unveiled a sweeping nine-point economic agenda aimed at lifting the country out of a prolonged industrial slowdown. Chancellor Friedrich Merz (CDU) and Finance Minister Lars Klingbeil (SPD) presented the plan during the “Day of German Industry,” a key meeting between political leaders and business representatives. The measures include significant tax relief for companies, infrastructure investments, lower energy costs, and reduced bureaucracy. A central feature is the controversial push to replace the traditional eight-hour workday with a flexible weekly cap on working hours.

The plan is intended to generate momentum after years of sluggish productivity. According to economic forecasts, Germany’s gross domestic product may only slightly exceed zero growth in 2025. The government hopes that combining targeted investments with regulatory reform will reverse this stagnation and restore competitiveness in global markets.

Eight-Hour Day Under Fire

Among the most contentious proposals is the elimination of the eight-hour daily work limit, which has been a cornerstone of German labor law for decades. Instead, the government suggests switching to a weekly maximum, allowing more flexible daily scheduling. Supporters argue that such changes could lead to increased efficiency and better adaptation to modern business needs.

However, strong opposition has emerged from workers’ councils and labor unions, particularly in northern Germany. A survey conducted by the IG Metall Küste district, involving 418 works council chairs representing around 200,000 employees, found that nearly 90 percent reject removing the daily limit, either outright or deem it unnecessary. The resistance is rooted in concerns over eroded worker protections, rising stress levels, and a possible dilution of labor rights.

Despite this, many workplaces already operate with flexible schedules. The IG Metall study shows that three out of four companies already implement flexible hours, and nearly two-thirds allow regular workdays of up to ten hours. But labor representatives argue that this flexibility is best achieved through collective agreements rather than legislative deregulation.

Expanding Work Hours or Avoiding the Real Issues?

Critics of the government’s labor reforms suggest that the focus on flexibility diverts attention from deeper structural challenges. IG Metall Küste district leader Daniel Friedrich stated that while workers in Germany are already putting in substantial effort, the lower average working time per person is due to a high proportion of part-time jobs, especially among women.

Friedrich emphasized that real productivity gains will come not from loosening labor protections but from public investment in innovation, digital infrastructure, and industrial policy. He called on the government to support value creation within Germany and Europe instead of shifting responsibility onto workers.

Corporate Tax Cuts and Reduced Energy Bills

The economic plan includes corporate tax cuts that are scheduled to take effect on July 1, 2025. While the proposal has already cleared the cabinet, negotiations are ongoing with state governments, which are expected to lose a combined €30 billion in tax revenue by 2029. Municipalities are requesting financial compensation.

To reduce operating costs, the government also plans to abolish the gas storage levy for consumers, shifting its financing to the Climate and Transformation Fund (KTF). In parallel, electricity bills are expected to decrease through a reduction of the electricity tax. These measures aim to ease inflationary pressure and increase purchasing power before the summer recess.

Pledges to Cut Red Tape and Bolster Start-Ups

Chancellor Merz is also targeting regulatory reform. One of the headline proposals is the elimination of the supply chain law, which mandates strict human rights due diligence for German companies operating abroad. Merz views this as symbolic of the wider issue of overregulation and plans further steps to reduce bureaucratic burdens.

Meanwhile, the government wants to boost tech and research sectors. A new ministry has been created for digital affairs and innovation, with 150 new positions planned. Legislative efforts are already underway to speed up broadband expansion through changes to the Telecommunications Act.

Support for start-ups is also included in the agenda. The WIN program (Growth and Innovation Capital) is set to receive double its current funding, with the aim of turning Germany into a more attractive environment for entrepreneurship.

Franco-German Coordination for Economic Policy

Another key element of the plan involves closer coordination with France on economic matters. Chancellor Merz and French President Emmanuel Macron are working on a joint framework to align their European economic strategies, particularly in response to policy developments in the United States and China. This initiative reflects an effort to strengthen the European industrial base and protect critical sectors from external dependency.

The plan builds upon the legacy of the Élysée Treaty and continued bilateral cooperation, which has historically underpinned the European Union’s most ambitious policy moves. It also aligns with long-term goals such as mutual digital standards, shared energy frameworks, and joint infrastructure projects.

Business Leaders Show Cautious Optimism

Peter Leibinger, President of the Federation of German Industries (BDI), welcomed the initiative, describing it as a sign that the government is finally taking industrial concerns seriously. After a prolonged period of pessimism, he noted signs of a shift in sentiment across the corporate sector.

Leibinger acknowledged that the new strategy touches on the right priorities, such as tax relief, infrastructure, and reduced regulation. He stressed that a transparent and collaborative approach between government and industry is key to restoring confidence and driving sustained economic renewal.

As the cabinet prepares to formalize parts of the agenda in tandem with the 2025 budget, attention will turn to how quickly and effectively these reforms can be enacted. For now, Germany stands at a crossroad: balancing labor rights with economic revitalization, and local traditions with the pressures of a globalized economy.