German parliament votes on contentious pension reforms

German lawmakers approved a controversial pension reform package proposed by Chancellor Friedrich Merz's governing coalition on Friday, following months of political wrangling.

One of the three bills met with resistance from parts of Merz's own conservative parliamentary group, with its youth wing threatening to reject it over fears of future costs running into the billions.

Germany's ageing population means the number of working-age people available to maintain current pension levels for an increasingly high proportion of retirees is dwindling, increasing the financial burden of welfare provisions on the next generation.

Despite the earlier youth-wing revolt, Merz succeeded in his aim of achieving a so-called "chancellor's majority" - an absolute majority of votes from his coalition of conservatives and Social Democrats (SPD), requiring at least 316 yes-votes.

The bill passed with 318 in favour, 224 against and 53 abstentions, according to deputy speaker Bodo Ramelow.

In the end, just seven conservatives voted against the reform package.

The hurdle was lowered for the measures to pass when the 64 lawmakers of the The Left party decided to abstain from voting. This may have nudged sceptics among the conservatives to support the package, so as not to appear reliant on the far-left party to push the measures through.

Crisis averted

Friday's vote staved off a looming government crisis, had the ruling coalition failed to garner enough support among its own ranks to pass the reforms.

If the Bundesrat, or upper house of parliament, approves the bill on December 19, the law can enter into force on January 1.

The reforms aim to stabilize pension levels, as well as expand pensions for women who were out of work for years while raising a family.

The two other pension bills - boosting occupational pensions and offering tax incentives for working beyond retirement age - were not contested within the coalition.

Youth rebellion

Under the approved bill, the pension level is to be maintained at 48% of average income until 2031. This is to prevent annual pension increases from lagging behind incomes in Germany.

As more baby boomers move from being pension contributors to retirees, the pension system is to be increasingly supported by tax funds. This will cost an estimated €11 billion ($12.8 billion) in 2031 alone.

Beyond that, however, the legislation foresees that subsequent pension increases remain higher than they would be in the absence of the law, building on the elevated levels - which is what the group of lawmakers, all in their mid-30s or younger, rejects.

From 2032 onwards, they warn of ever greater costs, saying the sustained pension level would cost €15 billion annually, which they consider too much. They argue the younger generation would end up paying too high a price.

The young conservatives accuse Labour Minister Bärbel Bas, of the SPD, of going beyond the coalition agreement struck between the parties when they took office.

Merz sided with the SPD in the dispute. The pension rebels were courted in one-to-one meetings, led above all by parliamentary group leader Jens Spahn. Friday's vote was therefore also a vote of confidence in his leadership role.

Merz's decision late on Thursday to seek a "chancellor's majority" underlined that it was also a test of confidence in his coalition, and ultimately its survival. Some commentators saw the move as an indirect confidence vote.

Tough times ahead

The pension row has left lasting scars. Trust between Merz and the young conservatives has been seriously damaged.

The young group is likely to continue its firm line in defending the interests of the younger generation, especially in the broader pensions reform planned for next year.

For the coalition, 2026 holds several challenges: Elections are due in five federal states, including in Mecklenburg-Vorpommern and Saxony-Anhalt, where the far-right Alternative for Germany (AfD) is polling at around 40%.

Reform decisions are therefore likely to be taken in a near-permanent campaign mode, and will be tougher than what the coalition pushed through in its first seven months, when there was only one regional election, in North Rhine-Westphalia.