Germany's 2027/2028 budget slashes business costs but raises taxes for high earners
Coalition Agrees on 2027/2028 Budget Framework—Two Weeks Behind Schedule
Nearly two weeks later than planned, Germany's federal government has reached a broad agreement on the key parameters of the 2027/2028 double budget, with all three coalition parties claiming partial victories. The Neos party outlined their achievements in a background briefing with journalists on Wednesday evening.
"In our first year in government, we've already accomplished far more than many expected of us," said party leader and Foreign Minister Beate Meinl-Reisinger at the outset. By the end of 2026, she noted, direct subsidies will have been cut by 23 percent—bringing the subsidy rate back to pre-crisis 2019 levels.
On the new double budget, Meinl-Reisinger emphasized that the government had fulfilled its obligations: consolidating around €1.5 billion in 2027 and €2.5 billion in 2028. But the real priority, she stressed, was the "extras"—above all, reducing non-wage labor costs.
How Much Relief Will Businesses Actually Get?
For years, the Neos have proposed funding employer contributions to the Family Burden Equalization Fund (FLAF) through the federal budget. Now, with these contributions set to drop by at least one percentage point—a €2 billion reduction—Meinl-Reisinger called the outcome "far better than we had hoped."
There is, however, a catch: Corporate taxes will rise for businesses earning over €1 million in profit. Additionally, while workers aged 60 and above were previously exempt from FLAF contributions, they will now have to pay. Vice Chancellor Andreas Babler (SPÖ) even argued that companies would effectively be "funding their own labor cost cuts."
Meinl-Reisinger disagreed: "Overall, businesses will see net relief of around €500 million." Neos economic spokesperson Markus Hofer added that the previous exemption for over-60s had created a "massive free-rider effect." The party's reasoning? Strengthening employment for older workers in other areas while ensuring employers face no practical difference between hiring a 59.5-year-old and a 60.5-year-old.
Meinl-Reisinger Confident: Retirement Age Will Rise
Speaking of older workers, Meinl-Reisinger framed the €550 million in pension savings over the next two years as a "negotiating success" for the Neos. "I also consider this fair."
Would the party have preferred structural pension reforms? "We're the only party pushing to link the statutory retirement age to life expectancy," she said, expressing confidence: "The retirement age will be raised—most of the public supports it, too."
In summer 2027, Social Affairs Minister Korinna Schumann (SPÖ) must present the first report on the sustainability mechanism, assessing whether the government's pension reforms are keeping spending on track. Meinl-Reisinger predicts they will fall short.
Mandatory Second Year of Kindergarten from Fall 2027
Among the coalition's proactive measures, education investment was another Neos priority. Education Minister Christoph Wiederkehr will receive an additional €130 million in 2027 and €210 million in 2028. "We'll allocate the funds where they'll have the greatest impact," Wiederkehr said, pointing to plans for a second mandatory year of kindergarten starting in fall 2027.
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