Coalition Reaches Agreement on Pensions, Combustion Engine Phase-Out, and EV Incentives
Berlin – November 28, 2025 – after six hours of late-night negotiations, Germany’s governing coalition – the CDU, CSU, and SPD – has reached a compromise on key policy areas including pension reform, the future of combustion engines, and funding for electric vehicles.
Regarding pensions, CDU leader Friedrich Merz announced the current draft law on the pension package will proceed to parliament unchanged at the request of the SPD, though a resolution emphasizing the need for further reforms will accompany it. This resolution will also task a pension commission with developing initial proposals by mid-2026. The agreement aims to secure the support of younger members within the CDU/CSU parliamentary group, whose consent is crucial for passage. SPD co-leader Lars klingbeil expressed satisfaction, stating, “The stop line is there,” and highlighting that one in five retirees currently face poverty risk.
The coalition also agreed to promote private pension provision with a total of ten billion euros in federal funding.
In a separate agreement, Chancellor Scholz will write to European Commission President Ursula von der Leyen requesting consideration for allowing highly efficient combustion engines to be approved even after the planned EU-wide ban on new combustion car sales in 2035. Merz stressed the need to balance climate protection with economic competitiveness.
the coalition commitee approved a new purchase bonus for electric cars and plug-in hybrids targeted at “households with small and medium incomes.” The basic rate will be 3,000 euros, increased by 500 euros per child, up to a maximum of 1,000 euros. An additional bonus will be available for households with a net income under 3,000 euros. The three billion euro funding will be drawn from the climate and transformation fund.
