Germany's governing coalition (the CDU/CSU and SPD alliance formed after the February 2025 federal election) is showing signs of strain after the influential business wing of Chancellor Friedrich Merz's own party publicly drew red lines on tax policy — less than 36 hours after Merz personally visited the SPD parliamentary group to urge both sides to stop issuing public ultimatums. The Parlamentskreis Mittelstand, the Union's powerful pro-business caucus, issued a formal resolution insisting that promised income tax relief for low and middle earners must be financed without any new tax burdens, directly contradicting Finance Minister Lars Klingbeil's repeated insistence that top earners must pay more in any reform package. The standoff leaves the coalition's central economic agenda unresolved, as both sides await Klingbeil's financing plan, expected in the coming weeks, amid unresolved questions over how relief measures costing tens of billions of euros annually will be funded.