Published by Global Banking and Finance Review
Posted on March 28, 2025
By Thomas Escritt
BERLIN (Reuters) - The senior leadership of Friedrich Merz's conservative bloc and the Social Democrats were due to begin talks on hammering out a coalition agreement on Friday. Here are the main issues:
HOW DID WE GET HERE?
Voters put Merz's Christian Democrats (CDU) and their Bavarian ally, the CSU, in first place in February's election, consigning outgoing Chancellor Olaf Scholz's Social Democrats to third.
Despite that, the SPD is Merz's only prospective partner for forming the strong two-party coalition he is aiming for. The CDU and other parties have vowed not to work with the second-placed far-right Alternative for Germany (AfD). This puts the SPD in a position of strength in the talks.
The conservatives and SPD are used to governing together, having done so three times under Angela Merkel. But they are far apart in areas including social, environmental and immigration policy as well as taxation.
In an indication of the level of dissatisfaction over some of the drafts circulating, all 16 working documents have been leaked, some of them repeatedly, despite efforts by party leaderships to keep the contents of talks under wraps.
WHERE DO WE STAND?
Over the past two weeks, 16 separate groups of representatives from all three parties have drawn up a 162-page consolidated plan for a four-year governing programme in different policy areas.
In the next round, 19 senior figures - party general secretaries, state premiers and leaders of parties at federal state level - will meet alternately in each other's party headquarters to thrash out a slimmed-down and ideally coherent programme.
FINANCIAL AND ECONOMIC POLICY
The SPD wants tax cuts for people on lower incomes and higher taxes for the richest. CSU leader Markus Soeder, premier of Bavaria, has ruled out any tax rises, while the CDU's Jens Spahn has said there must be spending cuts of up to 40 billion euros ($43.1 billion) in this year's budget alone.
MIGRATION AND SECURITY
The conservatives want to expand surveillance powers in response to a series of deadly attacks by foreigners, including automated facial-recognition systems in hotspots like railway stations and airports.
They also want to process asylum applications in third countries before claimants ever set foot in Germany and make it harder for failed claimants to stay.
The SPD wants an amnesty for people already in the country whose identity has been established for certain and who are in training or work.
FOREIGN POLICY
The conservatives want to create a National Security Council in the chancellor's office, which would strengthen the foreign affairs role of Merz, the likely next chancellor. The SPD, which is likely to control the Foreign Ministry, wants to create a National Situation Centre that would span the various ministries responsible for international emergencies.
On Israel, to which Germany feels a particular obligation because of the Holocaust, the conservatives want no limits on exports of arms Israel "needs for its security". The SPD's proposals condemn Israel's settlements policy and criticise the "catastrophic" humanitarian situation in Gaza.
The SPD says Germany has a particular responsibility towards the colonial-era genocide of the Herero people in modern-day Namibia. The conservatives' draft does not mention this.
The conservatives want to fold the Ministry for International Cooperation and Development into the Foreign Ministry to create "coherence" in trade, foreign and defence policy. The SPD wants to improve cooperation between three separate ministries.
ENERGY
Bavarian premier Soeder, whose state is one of Germany's industrial powerhouses, is demanding measures to help industry with soaring energy prices.
The conservatives want clean energy investments to be exempt from some environmental protection rules and to explore the reactivation of three nuclear power stations that were shut down by Scholz's government.
OTHER DIFFERENCES
The SPD wants a cap on rent increases, something opposed by the conservatives.
The conservatives want to abolish "in its existing form" the Freedom of Information law, which allows members of the public to read public authorities' documents.
The conservatives also want to abolish the national parliamentary police ombudsman, while the SPD wants to strengthen the office to help make police work "transparent and efficient".
AREAS OF AGREEMENT
The two blocs voted before the new parliament was seated to allow a massive expansion of government borrowing, providing for up to one trillion euros over the next decade to be spent on strengthening Germany's armed forces and revitalising its rusting infrastructure.
Regarding Germany's role in the world, the parties largely agree on wanting to work with the European Union to protect the bloc's economy from the impact of U.S. President Donald Trump's tariffs policy and on continued support for Ukraine in its fight against Russia's invasion.
($1 = 0.9289 euros)
(Reporting by Thomas Escritt)
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