German conservatives, led by Friedrich Merz, have successfully formed a coalition with the Social Democrats (SPD) to address economic challenges in the country. This agreement comes at a crucial time as global trade tensions threaten to push Europe’s largest economy into recession.
The coalition deal was finalized on Wednesday after weeks of negotiations following Merz’s election victory in February. Although his party, the Christian Democratic Union (CDU), won the most votes, it did not secure a majority, with the far-right Alternative for Germany (AfD) party gaining significant ground.
Merz emphasized the urgency of the coalition amid rising global trade conflicts, particularly those sparked by U.S. President Donald Trump’s tariffs. In a press conference, he sent a clear message to Washington, stating, "Germany is back on track," and outlined plans to increase defense spending and enhance the economy’s competitiveness.
The coalition agreement highlights the importance of maintaining strong relations with the United States, aiming for a free trade deal in the near future. Merz also pointed out the need for a unified European response to the ongoing tariff war, particularly between the U.S. and China.
Key policies in the coalition plan include tax cuts for middle and lower-income individuals, corporate tax reductions, and support for the electric vehicle industry. The coalition also intends to reform Germany’s strict spending limits, known as the "debt brake," which critics argue hinder economic growth.
In response to the AfD’s rising popularity, the coalition has signaled a tougher stance on immigration, proposing measures to turn away asylum seekers at the borders and halt expedited naturalization processes. Additionally, the coalition aims to establish a voluntary military service and create a national security council to address defense procurement and support Ukraine’s NATO aspirations.
The CDU will oversee the economy and foreign ministries, while the SPD will manage finance and defense. SPD leader Lars Klingbeil is expected to become the finance minister, with current Defense Minister Boris Pistorius likely to retain his position.
Before Merz can officially take office, the coalition deal must be approved by the SPD’s membership and the CDU’s convention on April 28. If successful, the coalition will hold 328 of the 630 seats in the lower house of parliament, allowing Merz to be elected as chancellor.
This coalition marks a significant political shift in Germany, as it is the only viable two-party alliance that excludes the AfD, which has recently topped polls with 25 percent support, overtaking the CDU at 24 percent. The new government faces the challenge of addressing economic concerns while managing the growing influence of far-right sentiments in German politics.