Will a compromise on the electricity tax be reached, or will the coalition fall back into the old traffic light pattern of mistrust and conflict? The coalition committee will reveal that.

It's the first major domestic political test for the CDU/CSU coalition government: In today's coalition committee, the leaders of the CDU/CSU and SPD must prove that they are capable of compromise on difficult issues such as reducing the electricity tax. Two protagonists will be at the center of this debate.

Chancellor Friedrich Merz (CDU) has cut a good figure on the international stage so far. Now, however, he must prove that he can also stimulate the economy and improve the mood in the country. "Of course, I have more plans than just managing the crisis," he said on Tuesday evening on the ARD program "Maischberger."

After his defeat in the SPD chairmanship election, Vice Chancellor and Finance Minister Lars Klingbeil enters the coalition committee weakened and must prove himself anew – in a new constellation. For the new Social Democratic co-leader Bärbel Bas, this is her first appearance among the most powerful coalition politicians, where she is now the only woman and will have to compete against ten men.

Everyone's eyes are on one issue in particular: Will the electricity tax reduction apply to everyone? The cabinet has introduced energy price relief measures effective January 1, 2026. Network charges, a component of the electricity price, are to be reduced, and the gas storage levy for gas customers is to be abolished.

The electricity tax reduction for industry, agriculture, and forestry is to be "permanent." However, contrary to the announcement in the coalition agreement, it will not be reduced for everyone, meaning not for all businesses or private households. This has sparked widespread criticism from business associations, trade unions, and social welfare organizations – but also within the CDU/CSU. Criticism has come from, among others, CDU parliamentary group leader Jens Spahn and North Rhine-Westphalia Minister-President Hendrik Wüst (both CDU). This, in turn, has angered the SPD.

Before the meeting of the coalition leaders, Merz expressed his fundamental openness to a possible extension of the electricity tax cut - but only if the counter-financing is secured.

According to the Federal Ministry of Finance, a reduction in electricity tax for all consumers would cost an additional €5.4 billion next year. Counter-financing would likely be difficult. The coalition would have to make concessions on other projects.

The economy is pushing for reliability. "Companies need clear prospects and must know what they can rely on in the coalition's economic policy," DIHK President Peter Adrian told the German Press Agency. "Many companies are urgently waiting for relief, especially when it comes to energy and labor costs."

The coalition wants to cut the citizen's income. The devil may be in the details here. According to initial plans obtained by dpa, the savings will amount to €1.5 billion next year, later rising to €4.5 billion. The "Bild" newspaper was the first to report on this. Initially, sanctions will be tightened. This will be followed by a fundamental reform with a recalculation of the standard rates.

According to the Federal Employment Agency (BA) in Nuremberg, around 32,900 people receiving citizen's allowance had their benefits cut due to misconduct last year – in February 2025, compared to 24,700 a year ago. Given that there are 5.5 million recipients of citizen's allowance, experts believe this makes it clear that enormous savings cannot be achieved. According to the BA, a total of €3.9 billion in citizen's allowance flowed to those entitled to benefits in March, which represents almost no change compared to March 2024. In March 2023, the figure was €3.5 billion.

Pensions are also likely to be discussed in the coalition committee. The planned first pension package by the Christian Democratic Union (CDU) and the Social Democratic Party (SPD) is expected to cost billions of taxpayers. "We cannot afford for pension spending to rise even more than it already is," Employers' Association President Rainer Dulger has already warned the coalition partners. However, the spiraling pension costs are not expected to begin until 2029, initially at €4.1 billion. According to Social Affairs Minister Bas's legislative plans, this figure is expected to rise to €11.2 billion by 2031.

This is primarily intended to pay for the planned stabilization of the pension level at 48 percent beyond the current year – and thus for further pension increases in line with wage developments in Germany. Without a stable pension level, the increasing transition of the baby boomer generation into retirement would result in pensions no longer rising as fast as wages.