The brief overview of the development of German pension policy institutions over the past three decades at the beginning of this chapter will show that the pace of change and systemic reform has been accelerating with the entry of Germany into an era of permanent austerity during the 1990s. While most of the literature in this decade was still highly skeptical with regard to the reform capacity of the German welfare state (see, e.g., Manow and Seils 2000; Esping-Andersen 1996b; Schmidt 2000; Kitschelt 2001), the important reforms that have been implemented since the coming to power of the red-green coalition government in 1998 prove the thesis of inertia wrong. The analysis of conflict lines in this chapter show that insurance reforms cut benefits severely and that, simultaneously, capitalization, targeting, and recalibration became important topics of reform, creating insider-outsider and skill level conflicts within the left. This increasing heterogeneity within the German left is the main result of the analysis of conflict lines and policy spaces in this chapter. The second stage of the analysis demonstrates that German governments tied reform packages combining different conflict lines for two main reasons. On the one hand, they tried to gather the partial approval for these highly controversial reforms from trade unions and/or opposition parties, but on the other hand, these packages were very important to enable agreement among the different coalition partners within the government.