Germany to tighten sick leave rules and raise retirement age under new reforms

Germany has unveiled a wide-ranging package of labour and economic reforms aimed at boosting growth, tightening workplace rules and addressing the country's ageing workforce, according to Reuters.

The coalition government led by Chancellor Friedrich Merz announced the "Relaunch and Employment Program", covering 34 policy areas including pensions, labour, taxation and industry.

Under the proposals, employees will be required to provide a doctor's certificate from the first day of sickness absence.

The government also plans to make it easier to dismiss high-income employees earning more than €180,000 a year in exchange for financial compensation, while the retirement age will gradually rise in line with life expectancy.

"We will put Germany back on the right track," Merz said after coalition leaders reached an agreement following overnight negotiations, Reuters reported.

The reforms come as Germany faces slowing economic growth, an ageing population and increasing pressure on its export-driven economy.

Reuters said the government has stressed the urgency of reforms as it seeks to revive productivity and strengthen business confidence.

Alongside labour market changes, the package includes tax cuts worth €10 billion annually for middle and lower-income households from next year, higher child benefits by 2028 and an increase in the top income tax rate from 45 percent to 47 percent for those earning more than €280,000 a year.

The measures combine labour market flexibility with expanded social support in an effort to balance economic reform with redistribution, Reuters reported.