Merz rejects tax rises for German medium-sized businesses

Germany's medium-sized businesses will not face increased taxes, Chancellor Friedrich Merz pledged on Saturday while speaking at a party event held by his conservative Christian Democratic Union (CDU) in the western city of Osnabrück.

Merz was responding to a proposal from his coalition partner, the centre-left Social Democratic Party (SPD).

"There will not be any increase in income tax on medium-sized companies in Germany with this federal government under my leadership," Merz told CDU delegates.

SPD Vice Chancellor Lars Klingbeil, who serves as finance minister in Merz's Cabinet, had said earlier that increased taxes for high earners and wealthy citizens could not be ruled out.

"No option will be taken off the table," the SPD leader told national public broadcaster ZDF last week, pointing to a large gap in the federal budget.

Merz expressed dissatisfaction with the government's work since taking office in early May, despite passing new migration policy and initiating moves to boost economic growth.

"I'm not satisfied with what we have achieved thus far. It has to be more," he said.

He called for the SPD to continue on a joint path "critical of migration and pro-industry" to show that Germany could be governed from the centre.

Communication between the parties needed to improve, with coalition partners talking to each other and not about each other, Merz said.

Germany's social policies needed renewal, Merz said, adding that he would not be deterred by language critical of cutbacks in welfare spending. "The welfare state that we have today can no longer be financed with what we produce in the economy," he said.

Merz acknowledged that he was not making things easy for his SPD partners. "But the call is to all of us: Let's show together that change is possible, that reform is possible."