Germany's next chancellor, Friedrich Merz, on Monday announced his first major cabinet nominations. He selected energy executive Katherina Reiche as the likely economy minister and close ally Johann Wadephul, a foreign policy expert, as foreign minister.

Merz’s CDU/CSU conservatives, who won the February elections, recently finalized a coalition agreement with the center-left Social Democrats (SPD) as they prepare to tackle international challenges and revive Europe's biggest economy. Their focus includes boosting growth amid a looming recession risk triggered by U.S. President Donald Trump's global trade policies and strengthening Germany’s defense posture within NATO.

Merz aims for his government to be more unified and decisive than the previous SPD-led coalition, which collapsed last November due to internal conflict. Even before officially taking office, Merz and the SPD secured a major fiscal stimulus package to boost spending on infrastructure and defense.

Under the coalition deal, Merz’s CDU will control the economy and foreign ministries, the CSU will lead the interior ministry, and the SPD will oversee defense and finance.

Boris Pistorius is likely to stay on as defense minister, while SPD leader Lars Klingbeil is the favorite for the finance ministry role.

Economic Priorities
The coalition plans to cut taxes for middle- and lower-income groups, reduce corporate taxes, lower energy costs, support the electric vehicle sector, and eliminate a controversial supply chain law. It also promises tougher immigration policies and stronger support for Ukraine against Russian aggression.

Katherina Reiche, the CEO of Westenergie and former head of Germany’s VKU local utilities association, is praised for her deep industry knowledge. She replaces Robert Habeck of the Greens, who faced criticism for lacking economic expertise during his tenure.

Johann Wadephul, a Bundestag member since 2009 and deputy leader of the CDU/CSU parliamentary faction on foreign affairs and defense, will succeed Annalena Baerbock as foreign minister. Analysts believe Wadephul’s close ties to Merz will bring a more consistent and stronger German foreign policy, especially regarding the U.S., China, and Russia.

New Digitalization Ministry
Recognizing the urgent need to modernize Germany’s digital infrastructure, Merz’s coalition has created a new Ministry for Digitalization, to be led by Karsten Wildberger, CEO of Ceconomy AG and former executive at E.ON, Telstra, and Vodafone. This move was hailed by digital industry leaders as a major step forward.

Additionally, Alexander Dobrindt from the CSU will take over the interior ministry, signaling a tougher stance on migration, as the coalition seeks to counter the growing popularity of the far-right AfD.

The SPD will announce its ministers after its members vote to approve the coalition deal, with results expected on Wednesday. Merz is set to be sworn in as chancellor on May 6.

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