"We know this is a tough decision. But we can no longer afford this competitive disadvantage caused by prolonged absences from work," said Merz.
He also noted that habits like four-day work weeks or excessive sick leave have negatively impacted national output relative to EU peers.
"The reform train has no brakes...
this is a substantial package designed to strengthen Germany as a business location in the long run and put public finances on a sustainable footing," said Carsten Brzeski, global head of macro at ING.
Financial analysts suggested the structural shifts would provide immediate support to domestic industrial sentiment during the second half of the year.
"One is tempted to shout, 'Finally!' It took a year, but the 'summer of reform' has arrived," said Brzeski.
Political and Social Reactions
The Social Democratic Party co-leaders supported the fiscal measures, emphasizing that the compromises reached would ensure long-term domestic stability.
The coalition had "agreed on solutions that can be supported by a broad majority of our society," said Lars Klingbeil, SPD co-leader and Finance Minister.
The Finance Minister also indicated that the policies would strengthen EU anti-dumping protections to shield local automotive and tech firms from unfair foreign competition.
The decisions would "give our country new strength," said Klingbeil. The center-left leadership maintained that the economic updates balance corporate flexibility with essential public welfare protections.
The package would "indeed ensure that the economy grows again, that we achieve growth and secure jobs, while maintaining social balance, and, above all, that we strengthen cohesion within our country," said Bärbel Bas, SPD co-leader.
