Germany has recently made significant strides in forming a new government, following weeks of negotiations between the conservative Christian Democratic Union (CDU) and the center-left Social Democratic Party (SPD). The coalition agreement, finalized on April 9, 2025, aims to revitalize Germany's economy and enhance its defense capabilities amidst global instability.
The coalition plans to spur economic growth through tax reductions for middle- and lower-income groups, decreased corporate taxes, and support for the electric vehicle sector. Additionally, the agreement includes proposals for increased defense spending and the establishment of a national security council to address rising global threats. The parties have also committed to maintaining Germany's climate neutrality target by 2045 and reducing energy prices to boost competitiveness.
However, the coalition faces significant challenges, particularly from the far-right Alternative for Germany (AfD), which has gained traction and risen to the top of recent polls, surpassing Merz's conservatives. Friedrich Merz is set to become Chancellor, with key ministerial positions still being finalized. The SPD is likely to secure the finance ministry, while Merz's party will oversee economic affairs and foreign policy.
The coalition agreement must be ratified by both parties before Merz can officially assume the chancellorship, expected in early May. This new government will face substantial tasks, including addressing economic instability, managing relations with the U.S. and EU, and countering the influence of the AfD.