Germany’s Merz and SPD Reach Coalition Agreement to Boost Economy, Defense Amid Global Trade Tensions
After several weeks of drift, Merz and the SPD announce a coalition agreement. The winner of the German election signs a deal to form a new government that will increase spending on defense and stimulate economic growth. The center-left Social Democrats (SPD) and German conservatives under Friedrich Merz have reached a coalition agreement with the goal of reviving growth in Europe’s largest economy at a time when a global trade war threatens recession. After Chancellor-in-waiting Merz won elections in February but fell far short of a majority, the far-right Alternative for Germany surged into second place, and weeks of negotiations ensued, the agreement was reached on Wednesday. STORIES RECOMMENDED a list of three items list 1 of 3https://youtu.be/bwqZTERQucw?si=aSr8rUpuMWF0hJ0T
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Pressure to reach a deal had taken on new urgency as the government will take charge at a time of global turbulence in an escalating trade conflict sparked by US President Donald Trump’s sweeping import tariffs.
Merz, who leads the Christian Democratic Union (CDU), sent an English message to the White House during a news conference with his coalition partners. “The key message to Donald Trump is Germany is back on track,” he said, promising to ramp up defence spending and boost the competitiveness of the economy.
The 69-year-old said the coalition pact provided a “strong and clear signal” both to its own citizens and other European countries, adding, “Germany is getting a government that is capable of action and strong.”
The deal stressed the importance of Germany’s relations with the United States, its largest trading partner, and aims for a free trade deal in the medium term.
Germany’s Coalition Agreement: A Plan for Economic Growth and Increased Defense Spending”
But Merz also emphasised that the European Union needed a common response to the escalating global tariff war that has put the US and China, in particular, at loggerheads.
“At the same time, the level of economic uncertainty is skyrocketing. Merz stated, “Decisions made by the American government, in particular this week, have sparked new turmoil.” The coalition agreed to implement a number of policies, including lowering corporate tax rates, lowering energy costs, supporting the electric car industry, and repealing a contentious supply chain law. It also plans a commission on further reforming Germany’s constitutionally enshrined spending limits known as the “debt brake”, long seen by critics as hobbling economic growth.
With the AfD breathing down its neck, the coalition signalled a tougher stance on migration, planning to turn away asylum seekers at Germany’s borders and scrap fast-tracked naturalisation, among other measures.
Global Trade War Drives Merz and SPD to Strengthen Ties with U.S. and Revamp Domestic Policie
The coalition also announced a voluntary military service and the creation of a national security council, as well as moves to speed up defence procurement and backing Ukraine’s bid to join the NATO alliance.
Merz, who had previously referred to the United States as an untrustworthy ally of Trump, has already pledged to increase defense spending in Europe in the face of a hostile Russia and to assist businesses battling high costs and low demand. The CDU is set to take charge of economy and foreign ministries, as well as the chancellery, while the SPD would run finance and defence, according to a document seen by the Reuters news agency.
As a result, SPD leader Lars Klingbeil is in the running to become finance minister, and popular Defense Minister Boris Pistorius is probably still in place. Before Merz can take the helm, the coalition deal needs approval in a ballot of the Social Democrats’ membership and by a convention on April 28 of Merz’s Christian Democratic Union party.
Once those hurdles are cleared, the lower house of parliament – in which the allies have 328 of the 630 seats – can elect him as chancellor.
The AfD, whose support has increased on the basis of a nativist and anti-immigration agenda, is excluded from the coalition, which is the only possible two-party majority. Ipsos released a survey on Wednesday that showed the AfD leading the polls for the first time, with 25%, which was a blow to Merz’s conservatives, who dropped to 24%.