Germany's New Coalition: A Return to Economic Growth Amidst Global Trade Turbulence

German conservatives led by Friedrich Merz have secured a coalition with the Social Democrats, focusing on reviving economic growth amid a global trade war. Policies include tax cuts, defense spending, and a stiffened migration stance. Merz highlights a united European stand in trade negotiations as key to overcoming current challenges.

In a significant political development, German conservatives helmed by Friedrich Merz have successfully forged a coalition with the center-left Social Democrats (SPD). This union arrives at a critical juncture as Europe's largest economy grapples with the looming threat of recession amid an escalating global trade war. The agreement concludes several arduous weeks of negotiations following Merz's electoral victory in February, albeit without a clear majority.

The coalition aims to steer Germany's economy back to growth amid tumultuous times marked by U.S. President Donald Trump's sweeping import tariffs that have heightened global trade tensions. In a press conference, Merz conveyed a resolute message to the White House, emphasizing Germany's renewed trajectory and pledging increased defense expenditures alongside economic competitiveness enhancements. The coalition also underscores maintaining strong ties with the U.S., Germany's foremost trading partner, while advocating for a consolidated EU response to the tariff conflict.

Policy proposals within the coalition's framework include tax reductions for middle and lower-income brackets, corporate tax relief, support for the electric vehicle sector, and abolishment of the contentious supply chain law. The coalition also seeks to reform Germany's spending caps enshrined in the 'debt brake' provision, foster stricter migration policies, enhance national security measures, and expedite defense procurement processes. A notable electoral shift sees the AfD topping recent polls, placing immense pressure on the new coalition government to rapidly implement promised economic and policy reforms.

(With inputs from agencies.)