Germany facing many domestic challenges in 2026

The German government, a coalition of the conservative Christian Democrats (CDU), its Bavarian sister party, the Christian Social Union (CSU) and the center-left Social Democrats (SPD), will have to deal with difficult domestic policy issues in 2026.

After grueling debates, the government passed its reform package for the state pension system through the Bundestag in early December. The pension level is to remain stable until 2031, a commission will develop fundamental reforms to the system and submit proposals by mid-2026.

Financial security in old age, in a society where people are living longer and the number of elderly people is rising, will remain a key concern for the country and its government.

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In the 2026 budget, the government subsidy to compensate for pension losses amounts to a hefty €128 billion ($150 billion) — around a quarter of the total budget. The pension commission is under pressure to develop truly practical proposals on an extremely complex issue.

Raising the retirement age from 67 is on the cards. But some, like economics professor Jens Südekum, suggest doing away with a fixed retirement age for everyone. Südekum has said the size of the pension a person receives should depend solely on the number of years they have worked and paid into the system.

In December, Chancellor Friedrich Merz (CDU) said the idea was "certainly worth considering," adding, "I want us to implement a comprehensive reform."

At the beginning of 2026, young people in Germany aged 18 and over will receive mail from the government. Men must then complete the enclosed questionnaire, while women can do so voluntarily.

The questions will focus on personal details, educational qualifications and other competences, as well as willingness to perform military service. Participation in a medical examination to assess their overall health and fitness will be mandatory.

The government is counting on finding enough volunteers to increase the number of Bundeswehr soldiers from approximately 184,000 now to between 255,000 and 270,000 over the next decade, and to increase the number of reservists to 200,000.

If all this does not work on a voluntary basis, the government will move to reinstate conscription, which has been suspended since 2011.

The far-right Alternative for Germany (AfD), a party with extremist elements, is already the strongest opposition party in the Bundestag. With several regional elections scheduled for 2026, it's expected to do well. In the eastern German states of Saxony-Anhalt and Mecklenburg-Western Pomerania, the AfD is currently polling around 40%.

Will the democratic centrist parties be able to take on the far right? And if the AfD becomes the strongest party by a wide margin in both states, will the promise made by the conservative CDU to never cooperate with the AfD hold true?

Both elections are not until September, but they will dominate the debates about how to deal with the AfD until then. State elections in the western states in Baden-Württemberg and Rhineland-Palatinate will kick off an exciting election year in March.

The issue of migration will continue to be high on the agenda in 2026. Since the current government took office in May 2025, Interior Minister Alexander Dobrindt (CSU) has made it clear that Germany is now pursuing a tough policy toward irregular immigrants with more people being turned back at the border.

In mid-December, the interior ministers of the European Union also agreed on a significant tightening of the common asylum policy. So-called "return centers" are now planned again in countries outside the European Union, even though previous attempts, such as the one by the Italian government in Albania, have not been successful.

With the common asylum policy, "...we will also manage to shift border controls to the European external borders," said Chancellor Merz in early December. This would spell the end of the time-consuming checks at all of Germany's external borders in 2026. Whether this will actually happen remains to be seen. The initiative of the EU interior ministers still needs approval by the European Parliament.

In December, the EU laid out its latest climate targets: Greenhouse gas emissions are to be reduced by 90% by 2040 compared with 1990 levels, as the European Union aims to be climate neutral by 2050.

German Environment Minister Carsten Schneider (SPD) was delighted. "The new EU climate target is probably the most important climate policy decision of this legislative period," he said on December 10.

In March, Schneider plans to present a new climate protection plan and explain how Germany can contribute to achieving its target. However, Economy Minister Katherina Reiche of the CDU is focusing on gas-fired power plants and has shown less interest in expanding wind and solar power.

Martin Kaiser, climate expert at the environmental group Greenpeace, told DW that "unlike under the previous coalition government, the dramatic shortcomings in the transport and housing sectors must be countered with adequate and socially acceptable immediate measures. A fossil fuel rollback in industrial and energy policy, as planned by Reiche, must not be allowed."

This article was originally written in German.

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