Chancellor Friedrich Merz said Germany must "pull itself together" or risk falling behind in a rapidly changing world, in a speech to trade unionists on Tuesday that was met with jeers, whistles and boos.
After a year in office, Merz's popularity has sunk and his government has become embroiled in disputes over how far and how fast to reform Europe's largest economy to revive growth and tackle ballooning healthcare and pension costs.
The sceptical reception among delegates representing workers from across industrial, public and service sectors reflects a wider battle in German politics over the pace of change at a time when established parties are losing votes to the surging far-right Alternative for Germany (AfD).
Merz's conservatives and their junior ally, the Social Democrats, were meeting later on Tuesday to thrash out differences, with Merz and his Vice Chancellor Lars Klingbeil batting away suggestions that the coalition could collapse.
After two years of recession, Germany returned to growth at the end of last year, but the fragile recovery risks being snuffed out by an energy shock from the war with Iran and new U.S. tariffs targeting carmakers that are already struggling against competition from China.
"The challenges are also so great because we have created problems for ourselves for far too long, problems that we now have to solve. We have simply failed to modernize our country," Merz told the German Trade Union Confederation (DGB).
"Germany must therefore pull itself together. Germany must tackle the structural problems that we have been putting off for many years, problems that have consequently grown steadily larger. You know it, we all know it."
Merz said high costs and bureaucracy were hurting business, putting jobs and the prosperity of future generations at risk.
But his case for reforming health and pensions, the latter a straightforward question of "demographics and mathematics," was greeted with periodic heckling, whistles and laughter, while some in the audience held thumbs-down signs.
Merz argued that significant changes to the welfare system and labor market rules are needed to revive the country's stagnant economy.
"These reform projects are not a threat; they are a great opportunity," he said.
Merz had previously promised an "autumn of reforms" to cut costs in Germany's social welfare system, but legislation has been slow to materialize.
At the end of April, the coalition struck a deal on health insurance changes, which had previously faced opposition from the labor-aligned SPD.
On Tuesday, Merz promised to continue by passing pension reforms – labelling this "undoubtedly the most difficult challenge" – by late summer.
Germany has the oldest working population in the European Union, with a quarter of the country's workers aged between 55 and 64, according to figures published in February.
Merz warned that demographic trends will mean that a shrinking share of younger workers will have to support growing numbers of pensioners in the future.
He has called for increased private investment in funding retirement.
The sputtering performance of Europe's largest economy – which is widely forecast to grow only about 0.5% this year – is "simply too little to maintain our prosperity", Merz said.
Without growth, "there will also be no effective welfare state, good healthcare, or adequate pensions," he warned.
DGB chair Yasmin Fahimi, who was reelected to her post on Monday, countered that any reforms must include a "fair distribution of the burden" and rejected government proposals to loosen working time regulations.
