German conservatives under Friedrich Merz agreed a coalition deal with the center-left Social Democrats (SPD) on Wednesday, aiming to revive growth in Europe’s largest economy just as a global trade war threatens recession.
The deal caps weeks of haggling between chancellor-in-waiting Merz and the SPD after he topped elections in February but fell well short of a majority, with the far-right Alternative for Germany surging into second place.
Pressure to reach a deal has taken on new urgency as the government will take charge at a time of global turbulence in an escalating trade conflict sparked by U.S. President Donald Trump’s sweeping import tariffs.
Merz, who called Trump’s U.S. an unreliable ally, has already vowed to build up defense spending as Europe faces a hostile Russia, and to support businesses struggling with high costs and weak demand.
Merz has also pledged to get tougher on migration, moving Germany away from a more liberal immigration policy under his conservative predecessor Angela Merkel during the 2015 European migrant crisis.
The coalition deal must still be ratified by a vote of the SPD’s membership.
If the SPD membership backs the deal, the chancellorship would return to conservatives after the three-year interregnum of the SPD’s Olaf Scholz, whose tenure was marked by the economic and political fallout following Russia’s full-scale invasion of Ukraine in 2022.
