On July 2, Germany's federal government unveiled a broad economic reform package centered on approximately 10 billion euros in annual income tax relief for low- and middle-income households, Die Welt reported. To help finance the package, the proposal raises the top marginal income tax rate from 45% to 47% for the highest earners. The wider package also includes pension reforms that would gradually link the retirement age more closely to life expectancy, labor market measures tightening sick-leave certification rules and expanding the use of fixed-term contracts, and initiatives to reduce bureaucracy, accelerate permitting, support strategic industries and increase housing supply.

The announcement marks the beginning of the legislative process. Most of the measures require approval by the Bundestag before they can enter into force. The government has indicated that it intends to advance the necessary legislation over the coming months with the objective of implementing key reforms by the end of the year. Parliamentary negotiations are likely to determine the final design of several measures, including the precise structure of the tax changes and elements of the labor and pension reforms.