After weeks of tense negotiations, Germany's conservative CDU/CSU bloc and the center-left Social Democrats (SPD) are reportedly on the verge of finalizing a coalition agreement as early as midday Wednesday, according to Reuters.
Key Details of the Deal
- Final Talks: CDU leader Friedrich Merz and SPD chief Lars Klingbeil will meet at 9:30 a.m. (0730 GMT) to resolve last-minute disputes—primarily over ministry allocations.
- Press Conference Planned: If successful, a joint announcement is expected in the afternoon.
- Economic Urgency: The parties face mounting pressure to form a government amid market chaos and fears of a global recession, triggered by Trump's aggressive tariffs.
Why the Rush?
- Recession Threat: Germany's 2024 growth forecast was slashed to just 0.1%, down from 0.8% in September, as export-reliant industries reel from trade wars.
- SPD Finance Minister's Warning: Joerg Kukies stressed that Germany needs a "government capable of action" to counter economic headwinds.
- Trade Stance: The coalition agrees on pursuing an EU-U.S. free trade zone while remaining open to other global deals—a subtle rebuke to Trump's protectionism.
Merz's Pledges Under Scrutiny
- Defense Boost: The CDU leader has vowed to ramp up military spending amid tensions with Russia.
- Business Support: Plans include aid for firms struggling with high costs and weak demand.
- Trump Criticism: Merz previously labeled the U.S. an "unreliable ally", signaling a strained transatlantic relationship.
What's Next?
If finalized, the deal would end political limbo but test the coalition's ability to navigate stagflation risks, energy instability, and a fragmenting global trade system.
Key Quote:
"The threat of recession doesn't allow for delays. Germany must act now." — Joerg Kukies, SPD Finance Minister
Analysis: The coalition's success hinges on balancing austerity with stimulus—a tough task as Trump's tariffs inflate import costs and Russia's war disrupts energy flows. Markets will watch for signs of policy cohesion in today's announcement.
(Sources: Reuters, Deutschlandfunk, economic institutes)