Chancellor Merz: "The Tanker is Turning" – Billions in Investment and 'Active Pension'
Too complicated? 🐿️ Read the "Short & Clear" version here.
Captain on the bridge: Chancellor Merz wants to turn "Tanker Germany" around – away from recession.
It was an appearance intended to radiate calm. Chancellor Friedrich Merz (CDU) took to the podium of the Bundestag today not only to defend the 2026 budget but also his first 200 days in office. While insolvency numbers are rising outside, Merz tried to paint a picture inside of a "turning tanker" – slow, but powerful.
The Key Points
- Record Budget: The 2026 budget totals 524.5 billion euros – with a focus on defense and infrastructure. Bundestag
- Industrial Electricity Price Cap: From January 1, 2026, energy-intensive companies will receive capped electricity prices to prevent them from leaving the country. ISPEX
- 'Active Pension' Starts: Those who continue working after retirement age can earn up to 2,000 euros per month tax-free. Federal Government
- Ukraine Aid Stands: Despite criticism from the AfD, 11.5 billion euros will flow to Kyiv – financed through budget reallocation. DLF
🇬🇧 🇺🇸 How does this compare to the UK/US?
The Political Landscape: Germany is currently governed by a "Grand Coalition" of the conservative CDU (similar to UK Conservatives or US moderate Republicans) and the center-left SPD (similar to UK Labour or US Democrats). This cooperation between the two biggest rivals is common in Germany but rare in Anglo-American politics.
The "Tanker" Metaphor: Chancellor Merz uses this image to explain that changing a major economy like Germany takes time – just like turning a massive ship. He is asking for patience amidst economic trouble.
"Aktivrente" (Active Pension): In the UK and US, you can work while drawing a pension, but you usually pay tax on that income. Merz's plan is radical: the first €2,000 you earn on top of your pension is completely tax-free. This is a huge incentive to keep skilled older workers in the workforce.
Background: Investing Against the Recession
"We are not saving ourselves into ruin, we are investing our way out of the crisis," is how one could summarize the strategy of the Black-Red coalition. Despite warnings about budget discipline, the budget provides for record spending – over 21 billion euros flowing additionally into crumbling bridges and railways.
Clear Stance Against Russia
Merz was particularly clear on the Ukraine question. Addressing the AfD opposition, he stated unequivocally:
"We do not want peace through capitulation, but rather we want peaceful coexistence of peoples in Europe on the basis of our democratic, liberal values." — Chancellor Friedrich Merz, General Debate Nov 26, 2025 [📺 00:52:19]
On the question of blame in the Ukraine war, Merz left no doubt:
"The war could end tomorrow if Russia stops its illegal attack... There is only one aggressor in this conflict." — Chancellor Friedrich Merz, General Debate Nov 26, 2025 [📺 00:54:45]
The consequence: Germany continues to stand firmly by Ukraine's side, with 11.5 billion euros in support for 2026.
Double Whammy 2.0? Cheaper electricity for the factory and tax-free extra income for the master craftsman.
Analysis: The Industrial Electricity Price as a Liberation Strike
The centerpiece of the economic rescue mission: From January 1, 2026, the industrial electricity price cap will take effect. Energy-intensive companies (steel, chemicals, glass) will receive capped prices to stop them from moving abroad. With costs of around 3.1 billion euros annually, this is a clear break with the pure doctrine of the market economy – and a concession to the harsh reality of global competition.
Active Pension: More Net Income for Seniors
In terms of social policy, Merz is also setting accents that go beyond mere redistribution. The "Active Pension" is coming. Anyone who has reached the statutory retirement age and continues to work can earn up to 2,000 euros per month tax-free.
Military Service: A New Duty to Defend
Merz also set clear accents on security policy:
"Peace and freedom do not come for free. Defense is the responsibility of all of us... That is why we are launching a new military service law." — Chancellor Friedrich Merz, General Debate Nov 26, 2025 [📺 00:59:52]
Reactions from the Parties
AfD (Alternative for Germany): Alice Weidel called the budget a "declaration of bankruptcy." The 11.5 billion euros for Ukraine were "burnt money" that was missing for German pensioners. She demanded her "Germany Plan" instead (see separate article).
Greens: The Greens welcomed the Ukraine aid but criticized the financing. Without a reform of the "debt brake" (constitutional limit on borrowing), important climate protection investments would fall by the wayside. The industrial electricity price was right, but coming too late.
FDP (Liberals): The Liberals criticized the industrial electricity price as a "permanent subsidy." Christian Dürr warned of a "subsidy race" that small and medium-sized businesses would have to pay for.
Consequences & Outlook
Merz is governing pragmatically. He has left behind the ideological trench warfare of the previous government and is relying on a mixture of state guidance (electricity price) and classic performance incentives (Active Pension). Whether this is enough to break the recession remains the great risk of his chancellorship. The budget is set, but success has yet to be seen at the workbenches and checkout counters. The year 2026 will be the litmus test: If insolvency numbers do not fall, the "turning tanker" will quickly be referred to as the "Titanic" again.