Germany’s new Conservative Chancellor Friedrich Merz has announced plans to reform the country’s burgeoning social welfare programme. In a TV interview with State broadcaster ARD Christian Democratic Union (CDU) MP Merz said he wanted to cap rent payments for welfare recipients.
Under the current Bürgergeld regime (citizen’s allowance), introduced by the previous left-wing government, the State effectively pays recipients’ rent and utilities for them.
Merz said these costs had got out of hand and that social institutions were too generous in accepting “basically any rental contract” and would pay much more than common for average rental apartments.
“In major cities you may sometimes get up to €20 per square metre in rent from social services or the Federal Employment Agency”, Merz said.
“If you extrapolate that, that is €2,000 per month for a 100 square metre apartment. A normal working family cannot afford that.”
He said he now wanted to introduce a cap on the maximum amount of living expenses to be covered from public funds. Welfare recipients who spent more than a legally determined “appropriate” amount would have to move or cover the difference out of their own pockets.
Merz said he believed the reform could be introduced in 2026 and save German taxpayers more than €2 billion in welfare costs annually.
These plans marked a step down from the bold welfare reforms his CDU promised in the run-up to the February 2025 general election.
The party initially promised to abolish the Bürgergeld programme altogether.
It soon became clear, though, that was impossible given its the current coalition partner, the Social Democratic Party of Germany (SPD).
Labour minister Bärbel Bas, leader of the SPD’s left-wing fraction, has repeatedly stated that she was open to reforms but would reject stronger sanctions for welfare recipients as well as a complete reversal of the programme.
Even Merz’s more modest suggestions for a rental cap may be smashed by his coalition partner’s stance.
SPD whip Dagmar Schmidt said: “Mr Merz’ proposals do not seem very well thought out. Housing for normal earners will not become cheaper by cutting support for Bürgergeld recipients.”
She added that the SPD would not consent to any benefit cuts.
The Bürgergeld programme replaced the previous Hartz IV regime in 2022, first introduced under then-SPD chancellor Gerhard Schröder in 2005.
It has been hailed as one of the main pillars of Germany’s economic boom in the 2000s and 2010s – as its meagre payments motivated recipients to seek employment.
The Bürgergeld, on the other hand, has been criticised as far too generous, effectively eradicating any economic benefit from working over receiving welfare.
The costs for the German budget have likewise ballooned.
In 2026, the total cost was expected to reach €52 billion – up from €43 billion in 2023. This corresponded to almost 14 per cent of total expected tax revenue.
