Germany's CDU/CSU and SPD Finalize Coalition Deal

Germany’s conservative CDU/CSU alliance and the centre-left Social Democrats (SPD) have finalized a coalition agreement, clearing the way for a new government to take office on Tuesday. Friedrich Merz, leader of the Christian Democrats (CDU) and incoming chancellor, vowed that the coalition would act decisively to address the country’s challenges.

“We recognize our near-historic obligation to ensure this coalition succeeds. We are determined to achieve this together,” Merz said ahead of the signing.

The 144-page coalition pact, titled "Responsibility for Germany," outlines plans to strengthen the economy, security, and migration policy while maintaining Germany’s commitment to climate goals.

Security and Migration

The agreement grants expanded powers to intelligence and law enforcement agencies, including the use of artificial intelligence to analyze publicly available data for certain criminal investigations.

On migration, the coalition plans a stricter approach, including suspending voluntary admission programs and family reunification for asylum seekers. Border rejections will be enforced "in coordination with European partners." A new federal police law will also streamline deportation procedures for individuals required to leave the country.

Economic and Tax Reforms

The coalition pledges to uphold Germany’s social market economy, aiming for "opportunities and prosperity for all." Measures include reducing energy costs, speeding up bureaucratic processes, and easing tax burdens for small and medium incomes mid-term.

From 2026, the reduced VAT rate of 7% will be reinstated for the hospitality sector. Additionally, tax incentives will encourage longer working hours.

Climate and Energy

The government reaffirms its commitment to the Paris Climate Agreement and Germany’s 2045 carbon neutrality target. The controversial Heating Act, introduced by the previous administration, will be replaced with a more flexible Building Energy Act focused on cutting CO₂ emissions. Expansions of wind and solar energy will continue.

New Cabinet Appointments

The SPD unveiled its ministerial picks, including:

• Lars Klingbeil as Vice Chancellor and Finance Minister

• Boris Pistorius retaining his role as Defence Minister

• Johan Wadephul (CDU) replacing Annalena Baerbock as Foreign Minister

• Alexander Dobrindt (CSU) as Interior Minister

• Stefanie Hubig (SPD) as Justice Minister

CSU leader Markus Söder described the coalition as a "community of responsibility," while Merz pledged swift action to reform Europe’s largest economy amid global economic and geopolitical challenges.

“Starting tomorrow, Germany will have a government determined to move forward with reforms and investments,” Merz said. “Our voice will be heard in Europe and the world.”

The coalition takes office following the collapse of the previous SPD-led government, which left a political void in Berlin. SPD co-leader Klingbeil warned that Germany must actively shape the changing global order—or risk being shaped by it.