German Chancellor Friedrich Merz’s ruling coalition has unveiled a sweeping package of tax, labour and pension reforms aimed at reviving Europe’s largest economy and countering a surge by the far right.

The “Programme for Revival and Employment” announced on Thursday includes about 10 billion euros ($11.4bn) in annual income tax relief targeted at lower and middle-income earners, taking effect from January 1, 2027.

The 34 reform measures also include an overhaul of the creaking pension system, tougher rules for employees’ sick leave and a reduction of the country’s stifling bureaucracy.

The tax relief is to be financed primarily by restructuring the surcharge on top incomes.

“The highest earners in this country will therefore take on a larger share” of the tax burden, said Finance Minister and Vice Chancellor Lars Klingbeil of the centre-left SPD. “That is fair, so that our country can move forward.”

It’s so weird to hear politicians make sense at the Cabinet level.