What To Expect From The New German Government

Germany’s incoming government presented a coalition deal last Wednesday, pledging to boost the economy and military – but critics say it falls short on welfare and climate action.

After four weeks of negotiations, the new German government coalition between the conservative CDU/CSU bloc and the social democrats of the SPD agreed on a plan outlining the most important goals for the upcoming administration. The coalition deal, a 144-page document titled “Responsibility for Germany”, spans a list of measures aiming to spur economic growth, invest in military defence, and crack down on immigration.

Further measures include efforts to lower rents, corporate tax cuts, bureaucracy reduction, and a general commitment to increasing the minimum wage.

The coalition between CDU/CSU and SPD is the result of February’s snap elections, after the previous government prematurely collapsed in November of last year, leaving the country to be ruled by a minority government. Coalition talks were shaped by the urgent need for a fast agreement to restore stability and decision-making power in the German parliament.

Amid growing discontent among the German population and external pressure from the US and Russia, the newborn coalition encounters significant challenges. The rise of the extreme-right AfD party is a key topic of debate in German politics, and the coalition sees it as their responsibility to restore trust in mainstream politics while managing global crises and strengthening European cooperation.

At the official press conference last Wednesday, Merz claimed that “Germany is back on track” – words spoken in English for US president Donald Trump to understand. The new government’s representatives billed the new coalition deal “a signal for change”, which through reform and investment tackles the economy, security, and migration – issues that are currently perceived as Germany’s key challenges.

The foundation for these changes was laid three weeks ago, when the parliament decided on new borrowings and a reform of the country’s “debt-brake”, a constitutional rule that limits government borrowing and has been a cornerstone of German fiscal policy since its introduction 16 years ago. Additional assumed state debt amounts to around one trillion euros over the next ten years, that will flow into infrastructure and the German military.

While this budget allows for greater financial flexibility and promises economic growth through investment, it has diminished support for Merz and the CDU across the political spectrum. Merz, who had explicitly and loudly opposed the Green party’s demands for reform of the debt brake over the past four years, is now being accused of voter deception and opportunism. And the coalition finds itself in a trust crisis, before their term of office has even started.

In the latest opinion polls, the AfD for the first time claims first place, overtaking the CDU that had won the February national elections.

The coalition deal also triggered protest from the left, criticising tax cuts directed mainly at corporations, and that support for small and medium incomes is too little and too late. Ines Schwerdtner, head of the Left Party that is gaining popularity, points out that planned economic measures largely consist of “presents for corporations”. Her party blames the coalition for its unwillingness to mitigate the growing financial inequality in the country, and for cutting down on the welfare state instead of targeting the super-rich and tax evasion. 

Furthermore, it is hard to overlook the fact that even though Merz repeatedly emphasized the significance of protecting young generations and the future, the word “climate” was not mentioned once in his introductory speech. The word is equally missing from the three-page preamble in the agreed-upon document.

The climate crisis will not be a focus of the new German government. The coalition proposes carbon prices as the main instrument to curb the country’s emissions, and elaborates on the issue only through vaguely-formulated commitments. CDU/CSU and SPD even plan on introducing new natural gas capacities during their term of office – infrastructure that will be void in 2045, the year by which Germany committed to reach climate neutrality.

Felix Banaszak from the Green Party criticises that the agreement “does not do justice to the current situation”. The newly assumed debt, according to the politician, was an important opportunity to invest in climate mitigation. “There is a lack of political will,” he continues, “which is bad news for the future of our country, our children and grandchildren”.

The coalition deal has yet to be officially approved by both parties, which should, however, be a mere formality. In May, Friedrich Merz will officially be named chancellor, and the parliament will be sworn in for the next four years. This time will show whether the new German government under chancellor Merz can keep its promises, and manage the domestic and international turmoil it was born into.