After the recent Bundestagswahl, coalition negotiations between the Christian Democratic Union (CDU/CSU) and the Social Democratic Party (SPD) are officially underway, setting the stage for significant political shifts. This step follows successful exploratory talks, and both parties are poised to act quickly to establish the new government.
The CDU, led by Friedrich Merz, and the SPD, under Lars Klingbeil and co-chair Saskia Esken, are introducing intense negotiations starting March 13, 2025, with the intent to produce results within ten days. Carsten Linnemann, CDU’s General Secretary, expressed the urgency of the negotiations stating, "We have no time to lose,” reflecting the parties' shared interest in moving swiftly.
These coalition discussions are particularly notable due to the substantial challenges the parties face, including convincing the Greens to support necessary constitutional amendments related to debt financing for infrastructure and defense. A remarkable €500 billion special fund for infrastructure investments is on the table, which requires extensive cooperation among the parties involved.
Each of the 16 working groups will consist of varied party representatives—seven from the SPD, six from the CDU, and three from the CSU—working together to hammer out the details of the proposed coalition agreement. Merz has indicated the need to focus on major points, ensuring the efforts do not become entangled with trivial details.
The urgency to swiftly address economic challenges is pressing; many within the CDU have pointed out the significant investment backlog facing local governments. The parties aim to offer significant relief to the middle class through reforms of the income tax system as outlined in their preliminary agreements, with potential reforms around the commuter allowance and tax legislation.
Underlying economic strategies also include repealing certain existing constraints like the debt brake, which currently limits the ability to incur new debt to below 0.35 percent of GDP. Alters or modifications to this policy will necessitate substantial agreement, particularly with the Greens, who have expressed concerns about increased borrowing purely for political projects.
Green leaders Katharina Dröge and Britta Hasselmann have voiced strong opposition, planning to recommend their party reject provisions of the agreement if they perceive issues such as tax cuts taking precedence over sustainable investments. "Whoever wants our approval for more investment must also show it is really about climate protection and economic development," Dröge emphasized, indicating the friction to come.
Migration policy also drives some significant divide between the parties. The intention to bolster control over border management and asylum requests, coupled with planned measures to tackle irregular migration, has led to skepticism from social policy advocates. SPD's Esken cautioned against potential unilateral actions if coordination with European neighbors were insufficient.