Following elections in February and four weeks of intensive talks, Germany has formed a new coalition government comprising the conservative Union parties (CDU/CSU) and the center-left Social Democrats (SPD). With Friedrich Merz taking the helm as Chancellor, this new "Black-Red" coalition will implement significant policy changes affecting foreign nationals living in Germany.

Immigration and Citizenship

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Dual Citizenship: A Significant Preservation

In a major win for foreign residents, the coalition has pledged to keep Germany's dual citizenship law, which came into force in June 2024. This represents a substantial concession from the Union parties, who had campaigned to abolish this achievement of the previous traffic-light coalition.

The preservation of dual citizenship means foreign nationals can still maintain their original citizenship while becoming German citizens—eliminating the difficult choice that previously forced applicants to give up their birth nationality.

Key Changes to Naturalization:

• End of the Three-Year "Turbo Track": The accelerated pathway to citizenship for "exceptionally integrated" foreign nationals will be discontinued. Those who qualified could previously apply after just three years of residence.
• Standard Five-Year Requirement Remains: Foreign residents will still be able to apply for German citizenship after residing legally in Germany for five years.
• Language Testing for Children: The government will implement nationwide language tests for four-year-olds with migration backgrounds to identify and address language development needs early.
• Potential Citizenship Revocation: The coalition has discussed creating mechanisms to rescind German citizenship from dual nationals demonstrating "extremist or anti-semitic" views, though legal experts question whether this would withstand constitutional challenges.

Work Migration and Asylum Policies:

• "Work and Stay Agency": A new institution will be established to provide comprehensive support to immigrant workers, including credential recognition, language assistance, and housing guidance.
• Continued Focus on Skilled Workers: The coalition plans to expand recruitment efforts in sectors facing worker shortages, particularly healthcare, IT, engineering, and trades.
• Stricter Asylum Measures:
  • Family reunification for people with temporary protection will be ended
  • Asylum seekers may be turned back at the border if they've passed through other safe countries
  • A "deportation offensive" will target individuals whose asylum applications have been rejected

Taxes and Cost of Living
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‍Tax Relief Measures:

CSU leader Markus Söder summarized the coalition's tax approach: "None of the taxes that have been discussed will be increased." Instead, residents can expect several beneficial changes:

• Income Tax Reductions: Targeted cuts for lower and middle-income earners, including adjusting tax brackets to account for inflation
• Enhanced Commuter Allowance: The Pendlerpauschale will increase from €0.30 to €0.38 per kilometer starting in 2026
• Tax-Free Overtime: Overtime work will become completely tax-free, providing opportunities to earn additional income without tax penalties (for employees)

Energy Cost Reductions:

High energy costs have hampered German economic competitiveness and strained household budgets. The coalition plans to address this through:

• Reduced Electricity Taxes: Taxes will be cut to the EU-mandated minimum levels
• Industrial Energy Relief: Energy-intensive industries will receive targeted electricity price subsidies to maintain international competitiveness
• Gas Tariff Elimination: The controversial gas tariffs implemented during the energy crisis will be completely scrapped

Social Welfare and Labor Market
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‍Wage and Pension Policies:

• Minimum Wage Increase: The coalition aims to raise Germany's minimum wage to €15 per hour by 2026 (up from the current €12.41), subject to approval by the Minimum Wage Commission
• Pension Stability: The current 48% salary replacement rate for pensions will be maintained despite demographic challenges
• Senior Worker Incentives: Workers beyond retirement age who continue working will earn an additional €2,000 per month tax-free alongside their pensions

Welfare and Family Support:

• Bürgergeld Replacement: The recently implemented citizens' allowance will be replaced with a new "basic income" scheme featuring stricter requirements and stronger sanctions for those refusing available work
• Parental Benefits: Elterngeld (parental leave allowance) will receive increased funding in the future
• Freelancer Protections: Self-employed women will gain legal entitlement to paid maternity leave benefits comparable to employed women

Transportation and Mobility
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• The popular Deutschlandticket will remain in place without immediate price increases
• A sustainable financing model will preserve the ticket through at least 2029
• Modest price increases are anticipated after 2029 to ensure financial sustainability
• Electric vehicle purchase subsidies will be reintroduced at €3,000 for vehicles under €40,000

Federal Spending and Economic Strategy
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‍Debt Brake Modification:

One of the most significant economic achievements of the new coalition is the modification of Germany's debt brake (Schuldenbremse), which had limited government borrowing to 0.35% of GDP since 2009:

• A defense exception has been created, allowing borrowing beyond the limits for military investments
• A €100 billion "Future Investment Fund" will finance economic modernization projects
• An additional €100 billion has been allocated for climate protection measures

Economic Stimulus:

• Corporate Tax Reduction: Germany's corporate tax rate will drop from 30% to 25% to improve international competitiveness
• Bureaucracy Reduction: A comprehensive program to streamline business regulations
• Research Incentives: Expanded tax benefits for R&D investments, particularly in AI, quantum computing, and biotechnology
• Climate-Industrial Support: Targeted subsidies for green industries to maintain Germany's manufacturing base while transitioning to climate neutrality

We'll be keeping a close eye on these changes as they unfold throughout 2025, breaking down what they mean for you as a foreign resident in Germany. Pop back to our blog regularly - we promise to cut through the political jargon and give you the practical info you need! Some of these new policies might make things a bit trickier, but there's also plenty of good news in there for everyone calling Germany home, no matter where you're from originally.

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We have another article tackling the new upcoming changes in Germany for Pension and health reforms if you are interested here: