Germany's former coalition agrees on tax relief, child benefits

By Christian Kraemer and Holger Hansen

BERLIN (Reuters) -Germany's Social Democrats, Greens and liberal Free Democrats (FDP), formerly part of a coalition that collapsed in November, have reached an agreement on income tax relief and a higher child benefit, the parties said on Friday.

The FDP, which moved into opposition after then-finance minister Christian Lindner was fired from Chancellor Olaf Scholz's coalition, has long pushed for legislation to offset the burden of inflation on taxpayers but said this should not come with new bureaucratic burdens.

According to a draft bill, the agreement will result in tax relief of more than 11 billion euros ($11.54 billion) for 2025 and 2026. The child benefit payments will increase by five euros to 255 euros per month.

Lindner welcomed the agreement on X, saying that "unnecessary and irrelevant bureaucracy will be avoided", resulting in "pure financial relief for citizens".

While still in government, the FDP had sought an adjustment in taxation to prevent a creeping effect on wages hit by high inflation, arguing that price pressures were eating into people's take-home pay.

Under pressure to spur Germany's ailing economy, Scholz fired Lindner in November, ending months of rowing over government spending and setting the stage for a snap parliamentary election in February.

The tax relief bill may be passed in the Bundestag lower house next week, together with the bill to increase child benefits.

($1 = 0.9533 euros)

(Writing by Friederike HeineEditing by Thomas Seythal and Gareth Jones)

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