Chancellor Friedrich Merz's "autumn of reform" could turn into a season of coalition strife as he plows ahead with his ambitious plan to reform Germany's welfare state, while bringing in tax reforms to boost the economy.

The challenges are significant: The German economy now faces a third year without GDP growth, the welfare state and pension system are failing to keep up with demographic challenges, and the federal budget has a hole of some €172 billion ($200 billion) for 2027 to 2029.

Apart from the enormity of the task, Merz's so-called "autumn of reforms" is likely to meet pushback from his coalition partners, the center-left Social Democratic Party (SPD), and the chancellor is keen to avoid friction in the government. Merz is all too aware that every coalition rift, such as the one over the supreme court judge earlier this summer, makes his government resemble the eternally riven, much-denigrated government under Olaf Scholz, which collapsed last year before its first full term was complete.

But compromise is not really the chancellor's style. He unleashed his more combative instincts at a state party conference for his center-right Christian Democratic Union (CDU) in Lower Saxony last weekend, where he flung a warning at his coalition partners: "If the SPD has the strength to become critical of immigration and friendly to industry, then this party has a chance of getting a foothold in the government, to participate, and to push the reforms in the country in the right direction," he told his party delegates.

Merz's dilemma

That naturally went down well with the CDU's conservative base, which has been rumbling with discontent ever since March, when Merz pushed the parliament to slaughter every German conservative's sacred cow, the national debt brake, to allow massive new loans to pay for defense and infrastructure projects.

"The CDU base has been peeved since then," said Oliver Lembcke, political scientist at Bochum University.

And Merz's basic dilemma — whether to please his base or maintain his coalition with the SPD — is not easily resolvable. In fact, it's impossible, according to Lembcke.

"I don't think he can really resolve it," he told DW. "For better or worse, he's dependent on the SPD, because mathematically there are no other majorities in the parliament."

As the CDU has ruled out coalitions with two of the other parties in parliament — the far-right Alternative for Germany (AfD), and the Left Party — the SPD, led by Finance Minister and Vice Chancellor Lars Klingbeil (SPD), effectively has a veto power over Merz and the CDU.

Welfare cuts or tax cuts?

The potential budget calculations are bewilderingly complex. Merz and Klingbeil will be hoping that with some tax raises here, benefit cuts there, and maybe raising the pension age too, the government will be able to balance the books without annoying too many different groups.

Merz insists that the current welfare system can no longer be financed, but he has already made concessions to the CDU's conservative Bavarian allies, the Christian Social Union (CSU), which will cost the state more money — such as raising the "mother's pension" and lowering sales taxes again for the gastronomy industry.

The SPD, for its part, wants to solve Germany's budget problems by raising taxes on the wealthy. According to political scientist Ursula Münch, director of the Tutzing Academy for Political Education in Bavaria, the upshot is likely to be some sort of compromise involving both tax cuts and unemployment benefit cuts. "I am assuming that there'll be no way around conceding to the SPD on taxing the highest earners, and then expecting a concession from the SPD," she told DW.

Merz is not Scholz or Merkel

All this is awkward for the chancellor, whose strength is his strident rhetorical style, and who is keen to project an image of strong leadership. Part of the reason he was elected as the CDU's party leader in 2022 was because he was seen as a forthright speaker who expressed himself in clearer terms than the last CDU chancellor, Angela Merkel, and indeed his taciturn SPD predecessor Olaf Scholz.

"That could be an advantage," said Lembcke. "And we see that in his foreign policy, where I think he has gained stature in a relatively short time. He is one of the leaders, perhaps even the leader, when it comes to expressing European positions against the USA." President Donald Trump, for one, seems to like Merz a lot better than his predecessors: After their first White House meeting, Trump said of Merz: "He is a very good man to deal with, he is difficult, but he is a very great representative of Germany."

But while Merz's style might work well at an international level, Lembcke thinks that domestically it often comes out as an "empty gesture." "He says some snappy words, as at the weekend, and then on Monday, his coalition partners say, 'You want to blackmail us? We can do that too'," he said. The result, as so often, is that he then has to find a compromise after all.

Lembcke's analysis seems to be reflected in German opinion polls, which showed that Merz's personal popularity rose in June, at the time of the chancellor's first trip to the White House, but has fallen since then: In an ARD Deutschlandtrend survey conducted in August, satisfaction with Merz fell to just 32% — a drop of ten points compared to the previous month. Some two-thirds of Germans (65%) expressed dissatisfaction with Merz's work.

Given the challenge he's given himself with his "autumn of reforms," winning back those voters won't be easy. Apart from those core CDU voters peeved with the massive new national debt, both CDU and SPD voters are disappointed that the promised plans to cut electricity taxes have not come through for households and small and medium-sized businesses.

CDU and SPD stuck in a 'coalition of the weak'

As for the SPD, it is in an even weaker position than the CDU, with current polls putting the party at just 15% — on the back of their worst national election result ever in February — and they are now a long way behind either the CDU and the far-right Alternative for Germany (AfD).

Maybe the only advantage for the government is the rapport between Merz and Klingbeil, who have reportedly struck up a good working relationship. "That's the one thing that is working really well in the government," said Lembcke, "because in principle they have a very similar problem." The SPD party base, which is generally further left than the leadership, is unhappy with Klingbeil's decision to keep the party co-leadership for himself and with his silence on the government's hardline immigration measures.

Both Merz and Klingbeil are therefore keen to underline the need for compromise. The plan is "difficult for the Social Democrats, and for us too, for that matter — and I am deliberately not making it easy for them," Merz said in his conference speech. "But the appeal is directed at all of us: Let us show together that change is possible, that reform is possible."

Whether that appeases a CDU membership is another matter. But Münch has little sympathy and thinks that members of both government parties need to recognize that they're stuck in a "coalition of the weak."

"The CDU isn't strong and the SPD is even weaker," she told DW. "And they need to be aware that they're guaranteed not to achieve anything with maximalist demands." So whether the German public likes it or not, compromise looks like the only way forward — even if it ends up pleasing no one.

Edited by Rina Goldenberg

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