The German government may now convene a mediation committee to seek a compromise. The proposal, which would have allowed companies to pay employees up to 1,000 Euros as a tax-deductible expense, faced opposition from state leaders concerned about potential multi-billion Euro tax losses. Thüringen’s Minister-President Voigt criticized the initiative as well-intentioned but poorly executed, while Mecklenburg-Vorpommern’s Minister-President Schwesig called for a comprehensive reform package instead of isolated measures. Green Party leader Dröge labeled the situation a ‘debacle’ for Chancellor Merz and the federal government.