Germany is preparing for a political reset after the Christian Democratic Union (CDU), Christian Social Union (CSU), and the Social Democratic Party (SPD) formally finalised a coalition agreement on Wednesday.
This new centre-aligned alliance follows weeks of negotiations that began after February’s national elections, which saw the CDU/CSU bloc emerge as the top vote-getter, with the SPD trailing in third place behind the far-right Alternative für Deutschland (AfD).
The deal must now be approved by the parties’ members before the new government assumes power.
At the heart of this agreement is a commitment to stabilise Germany’s economy, enhance internal security, and reaffirm the country’s position as a reliable force within Europe.
But these plans are unfolding against a complicated international backdrop involving NATO, US tariffs, and ongoing uncertainty over the war in Ukraine.
Fiscal reforms and migration plans
The negotiations between the CDU, CSU, and SPD encountered major delays due to disagreements over budget priorities, tax policies, and migration management.
As Germany grapples with high inflation, energy challenges, and reduced industrial output, the coalition focused on pushing a significant fiscal reform package.
The package includes revisions to federal budget rules, potentially raising spending limits to allow for higher investments in infrastructure and digitalisation.
However, reaching consensus took time, as there was internal pressure on CDU leader Friedrich Merz not to offer excessive compromises to the SPD.
While the SPD is Chancellor Olaf Scholz’s outgoing party, its influence in shaping policies, particularly around migration, remained a sticking point in talks.
SPD negotiators reportedly insisted on maintaining humanitarian commitments even as the CDU and CSU sought stricter border controls and faster deportations for rejected asylum seekers.
New government before Easter
Friedrich Merz, who is now set to become Germany’s next chancellor, had made it clear that the coalition agreement had to be in place before the Easter holidays later this month.
The urgency was tied not only to domestic stability but also to the need for Germany to respond quickly to shifting global dynamics.
Since the elections, Germany has been governed by a caretaker administration, limiting its ability to introduce major policy changes.
The finalisation of the agreement allows Merz’s incoming government to begin tackling pressing issues with a stronger mandate.
Germany’s coalition model, which often requires cross-party consensus, means the CDU-CSU-SPD bloc will need to continue working together to implement their shared goals.
With party members now required to formally approve the coalition deal, the structure of Germany’s next government could be confirmed within days.
Tariffs and NATO shape talks
The negotiations were complicated by Germany’s need to navigate an evolving global environment.
US President Donald Trump’s reintroduction of tariffs created economic uncertainty for Germany’s export-driven economy.
Meanwhile, Washington’s role in the Russia-Ukraine conflict has raised questions over the long-term stability of international alliances.
One area of concern has been NATO defence contributions. Trump’s administration has repeatedly pressed member states to meet the defence spending target of 2% of GDP.
Germany, which has historically fallen short of this benchmark, now faces increasing pressure to allocate more resources to military readiness.
The coalition agreement is expected to include provisions addressing this requirement.
Simultaneously, doubts have persisted about whether the US will maintain its level of aid to Ukraine, putting more pressure on Germany and other EU nations to fill any potential gaps in humanitarian and military assistance.
With the war in Ukraine now entering its third year, European security dynamics are an increasingly important factor in German policymaking.
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