German conservative leader Friedrich Merz has struck a coalition deal with the centre-left Social Democrats (SPD), forming a new government aimed at lifting Europe’s largest economy out of stagnation just as U.S. tariffs risk plunging global trade into crisis.
Merz, who is set to become chancellor after February’s election win, fell short of a majority, with the far-right AfD surging into second place. His deal with the SPD ends weeks of talks and arrives at a moment of global volatility.
“The key message to Donald Trump is: Germany is back on track,” Merz said in English during a joint press conference, promising to raise defence spending and boost Germany’s economic competitiveness.
The coalition agreement includes tax cuts for low and middle-income earners, corporate tax relief, lower energy prices, support for electric vehicles, and the rollback of a controversial supply chain law. It also pledges to reform the “debt brake” fiscal limits that many economists see as restricting growth.
Merz credited European unity with influencing Trump’s sudden decision to pause new tariffs for 90 days. “This example shows you: unity helps,” he told RTL, calling for a 0% transatlantic tariff deal to end the crisis.
Defence and migration also feature prominently in the pact. The coalition will introduce voluntary military service, set up a national security council, speed up arms procurement, and support Ukraine’s bid to join NATO.
On migration, the tone shifts sharply from the Merkel era, with plans to turn away asylum seekers at the border and scrap fast-track citizenship. With the AfD gaining support, Merz is under pressure to reclaim the narrative on migration and security.
The CDU will control the economy, foreign affairs, and the chancellery, while the SPD will hold finance and defence. That likely puts SPD leader Lars Klingbeil at the helm of the finance ministry and leaves Defence Minister Boris Pistorius in place.
But Merz’s challenge is growing. A new Ipsos poll shows the AfD leading nationally with 25%, ahead of Merz’s conservatives at 24%. Critics also point to his borrowing push to fund spending, saying it undermines Germany’s tradition of fiscal discipline.
Economists warn time is short. “The agreed infrastructure investments need to be launched quickly,” said Deutsche Bank’s Robin Winkler. “Germany must act now to avoid a third year of recession.”
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Danish Prime Minister Mette Frederiksen said “you cannot spy against an ally” following reports that the U.S. has increased intelligence efforts in Greenland, a semi-autonomous Danish territory.
Iran has agreed to hold a fourth round of indirect nuclear talks with the United States on Sunday in Oman.
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The swift election of Pope Leo XIV reflects a clear consensus among cardinals for continuity, unity, and a leader capable of bridging divides both within the Church and across the globe.
Danish Prime Minister Mette Frederiksen said “you cannot spy against an ally” following reports that the U.S. has increased intelligence efforts in Greenland, a semi-autonomous Danish territory.
Iran has agreed to hold a fourth round of indirect nuclear talks with the United States on Sunday in Oman.
Ukraine's security service says it has detained two alleged Hungarian spies accused of gathering military intelligence in the Zakarpattia region, near the shared border.
Ukrainian President Volodymyr Zelenskyy announced that leaders of the "coalition of the willing" will meet in Kyiv on Saturday, as Europe weighs its long-term security role in Ukraine's future.
The swift election of Pope Leo XIV reflects a clear consensus among cardinals for continuity, unity, and a leader capable of bridging divides both within the Church and across the globe.
Danish Prime Minister Mette Frederiksen said “you cannot spy against an ally” following reports that the U.S. has increased intelligence efforts in Greenland, a semi-autonomous Danish territory.
Iran has agreed to hold a fourth round of indirect nuclear talks with the United States on Sunday in Oman.
Ukraine's security service says it has detained two alleged Hungarian spies accused of gathering military intelligence in the Zakarpattia region, near the shared border.
Ukrainian President Volodymyr Zelenskyy announced that leaders of the "coalition of the willing" will meet in Kyiv on Saturday, as Europe weighs its long-term security role in Ukraine's future.
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