Germany’s conservatives, led by chancellor-in-waiting Friedrich Merz, sealed a coalition deal with the centre-left Social Democrats (SPD) yesterday to boost the national economy, Europe’s largest, and to tackle the country’s migratory concerns. The deal comes on the cusp of the international trade war U.S. President Donald Trump‘s threatened import tariffs have triggered and the recession many fear might follow.
Merz sent a blunt message in English to the White House when announcing the pact at a press conference in Berlin yesterday. “The key message to Donald Trump is Germany is back on track”, he declared. He and his partners are determined to increase defence spending and committed to making the German economy more competitive, hence this “strong and clear signal” for Germans and other European citizens that “Germany is getting a government that is capable of action and strong”.
Merz said the coalition intended to seek a free trade deal with Washington in the medium term but that the European Union required a common response given that “economic uncertainty is increasing enormously”. He cited how this week alone the Trump administration’s decisions had “triggered new turmoil”. Later in the day, referring to Trump’s announced 90-day pause to the tariffs, Merz told German TV it showed that Europe’s united stance on trade policy had paid off.
The Merz-led incoming coalition has agreed to lower taxes for middle and lower incomes as well as lowering corporate tax and energy prices, while providing support to the electric car industry. Proposed measures also include an overhaul of Germany’s “debt brake”, the constitutional provision that limits spending, which critics contend holds back the country’s economic growth.
Joerg Kraemer, chief economist at Germany’s Commerzbank, allows that the plan is a step in “the right direction” but insists more is needed to restart the economy “in view of the competitiveness that has been eroding for years”.Â
The coalition has signalled a tougher stance on migration with plans to turn away asylum seekers at Germany’s borders and to scrap fast-tracked naturalisation. It also announced a voluntary military service, the creation of a national security council, plus moves to expedite defence procurement and backing for Ukraine’s Nato membership bid. The tougher approach to migration is a distinct backing away from the more liberal policy Germany pursued under Merz’s conservative predecessor, Angela Merkel, during the 2015 European migrant crisis.
According to Reuters news agency, the CDU will be responsible for the economic and foreign ministries as well as the chancellery, while the SPD would run finance and defence.
The coalition is made up of the only possible two-party majority combination available that ensures the exclusion of the extreme right-wing, nativist, anti-migration AfD. The latest Ipsos survey, released yesterday, shows the AfD topping the polls for the first time with 25%, a percentage point ahead of Merz’s conservatives, the previous leaders.
