4 min readJul 2, 2026 09:53 PM IST
First published on: Jul 2, 2026 at 09:53 PM IST
German Chancellor Friedrich Merz on Thursday unveiled sweeping economic reforms, including stricter sick leave rules that will abolish phone-based sick notes and require employees to submit a medical certificate from the first day of illness.
As part of these reforms, Merz also brought in immense changes to sick leave rules, removed the right for Germans to get sick leave via telephone, and also introduced a requirement for workers to “submit a medical certificate from the very first day of illness.”
He said, “We know this is a tough decision. But we can no longer afford this competitive disadvantage caused by prolonged absences from work.”
This move comes under the 34 measures introduced by Merz’s coalition government to rejuvenate Germany’s sluggish economy. The current coalition came into office with pledges to turn the economy around, but questions have been raised against them as very little has been achieved in that regard.
Markus Blumenthal-Beier, the head of the German Association of General Practitioners, told the RND media group the changes proposed for the sick leave were “absolutely catastrophic” and would clog up the health system.
Germany’s robust reform package
Significant tax relief for lower-income families, changes to the pension system, reducing red tape for businesses, and granting employers increased flexibility to hire workers on short-term contracts are among some of the reforms introduced on Thursday.
Reactions to the package have been mixed. While economists welcomed the proposals, as concrete changes were finally brought into motion, some critics flag them as unfair and unworkable.
“We want to get Germany back on track,” Merz told reporters. Affordable housing, building an action plan against benefit fraud, and annual tax relief of €10 billion for low-income earners. This tax relief will be funded by raising the tax rate for the highest earners with an annual income of €280,000 or more from 45% to 47%.
A commission was appointed by the Chancellor last month for pension reforms, which the parliament will pass by the end of the year. It has suggested a gradual increase in the retirement age, with an adoption of Sweden’s pension system. Sweden does not have an official retirement age, but the later someone retires, the higher their pension benefits. The unions that are opposing this change are ones with physically demanding jobs, with employers also saying that this would make hiring even more expensive.
Rejuvenating the economy
Germany has been struggling since the COVID pandemic to get back on track, but increased Chinese competition, along with the higher energy prices caused by wars and conflicts around the world, has put up challenges to the export-centric model on which their economy runs. While China has not been mentioned by name in these reforms, its burgeoning industries are seen as rivals to Germany’s own major automobile industry.
The government has cut down on its growth forecast for the year to 0.5%, with its growth predictions for the upcoming year to 0.9%, from the initial 1.3%. Inflation estimates have increased due to the increasing energy prices.
Merz’s earlier remarks on the four-day work week and taking overly long sick leaves that harm the country’s competitiveness also struck a nerve with Germans, who have some of the shortest working hours in the European Union. Ifo Institute President Clemens Fuest told news agency Reuters, “Tax relief is not feasible in the medium term unless the growth of government spending is curbed.”
(This article was curated by Sneha Sharma, an intern at The Indian Express)
Germany's Chancellor Friedrich Merz announces sweeping economic reforms, including stricter sick leave rules requiring employees to submit a medical certificate from the first day of illness. (Source: Reuters) 
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