German Leaders Reach Governing Agreement

After six weeks of intense back-and-forth, Friedrich Merz is set to lead a coalition of Germany’s center-right and left parties, but the challenges are just beginning (Wikimedia Commons).

A month and a half after Germany’s recent parliamentary elections, political leaders have unveiled the structure of a governing coalition that is set to lead the country for the next five years. The April 9 announcement sees the center-right CDU—who received the largest share of the vote—forming a coalition with the center-left SPD—who led the outgoing government before notching a third-place finish in the February 23 election. 

While a power-sharing agreement between the CDU and SPD was seen as the most likely outcome, the two parties still needed to iron out a laundry list of issues, including, as Reuters reports, immigration, energy, and trade. Representatives from both sides spent weeks debating how the coalition would function, operating under strict protocols that restricted communication with the press, social media posts, and even proposal formatting. The ironclad rules, obtained and reviewed by POLITICO, were implemented to prevent the recurrence of widespread leaks that plagued the last round of negotiations in 2021. 

The new government says it will seek to remove taxes on overtime pay, decrease household energy costs, ramp up defense spending, and eliminate an accelerated path to citizenship. The arrangement also represents the most consequential step in CDU Leader Friedrich Merz’s journey to become Germany’s next Chancellor. The formalization of a governing majority now clears the way for him to take office as the country’s tenth post-war leader as soon as the first full week of May, per DW. 

A core motivator of the negotiations’ completion was the recent introduction of tariffs by U.S. President Donald Trump on April 2, which sent shockwaves through global markets. The resulting uncertainty, only exacerbated by reversals and conflicting statements from the White House, seriously threatened the German economy—the country’s DAX index slid 12.5 percent in the week after the tariffs’ unveiling. According to POLITICO, Merz and others sought to broadcast strength and ensure that the country would be able to respond quickly to future challenges. 

Serious questions about the United States’ commitment to the security of its NATO allies, combined with fears of a third-straight year of economic stagnation, had already forced Merz to take the highly unusual step of passing a major spending package through the lame-duck parliament. The legislation, as the Caravel previously covered, will pour €500 billion into the German economy. 

But that decision appears to have proven unpopular, especially for a candidate who ran on a platform of fiscal restraint. Opinion polling from Reuters shows the far-right AfD, who finished second in the recent elections, surpassing the CDU to become the country’s most popular political party, a historic first for the controversial group. The CDU and SPD—alongside other parties in Germany—have often gone to great lengths to prevent the AfD from joining governing coalitions, and the recent negotiations were no exception. 

With voters seemingly losing faith in Merz’s leadership before his tenure even begins, the onus is now on him to prove his doubters wrong and steer Germany through what will surely be a turbulent year ahead.