German conservatives under Friedrich Merz agreed a coalition deal with the centre-left Social Democrats (SPD) on Wednesday, aiming to revive growth in Europe’s largest economy just as a global trade war threatens recession.
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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 US President Donald Trump’s sweeping import tariffs.
The conservative CDU-CSU bloc and the SPD will present their agreement to form a new government at 3pm, the CSU party said.
Merz, who called Trump’s US an unreliable ally, has already vowed to build up defence spending as Europe faces a hostile Russia, and to support businesses struggling with high costs and weak demand.
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He 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.