The new German government’s coalition agreement makes for interesting reading, with many announcements relevant for the EU. Below is a quick (and incomplete) summary of the 146-page document. Titled “Responsibility for Germany”, the agreement suggests a return to stability under a Grand Coalition government—while Germans are by now very familiar with this partnership, the voting share of the CDU/CSU and SPD has steadily declined over previous coalitions.
Much as with the new Commission agenda, the coalition agreement stresses the need to improve German competitiveness and turn around economic stagnation, including by making Germany “an Artifical Intelligence (AI)- and founders-nation.” At the core of this will be the (up to) 1tn Euro spending plan to repair Germany’s defence industry and ageing infrastructure. The agreement especially focuses on the 500bn investment on infrastructure and net-zero (“Sondervermögen für Infrastruktur und Klimaneutralität“).
The coalition also promises to cut red tape for businesses by 25 percent (16bn Euro) and reduce the size of the federal government by 8 percent over the next four years. There will be tax credits for investments; for example, businesses can write down 30 percent of equipment investments in 2025, 2026 and 2027.
Interestingly, the German tendency to gold-plate EU law is explicitly recognised and (at least partly) addressed: The parties agreed to abolish the German supply chain law and rely on the EU Directive on corporate sustainability due diligence (CS3D) instead. They also commit to transpose EU directives “in a 1:1 fashion” (whatever this means concretely) and call for the simplification of the Carbon Border Adjustment Mechanism (CBAM) bureaucracy.
Special attention is directed at supporting innovation and the scaling up of businesses: for example, there will be a public administration one-stop shop for start-ups, a “Deutschlandfonds” to crowd-in private investment on cloud and AI of 10bn Euro (which appears tiny compared to some of the other announcements), and a commitment to once-only reporting—“Datendoppelerhebungsverbot”, a welcome surprise to see that this concept can also be expressed in German!
On digital policy, the new government not only creates a new Digital Ministry to modernise bureaucracy (“Ministerium Digitalisierung und Staatsmodernisierung”), but wants a “digitally sovereign Germany”. This would mean reducing digital dependencies by developing critical technologies, building and protecting critical infrastructure, and establishing resilient European supply chains for critical technologies, including for critical raw materials, chips, hardware and software.
Notably, the agreement also calls for adjusting the EU digital rulebook to address dynamic developments on AI. In particular, it stresses the need to reduce the regulatory burden of the AI Act “via technical and regulatory specifications” and promises its innovation-friendly implementation at the national level. There will also be a central service point for businesses and plans for a German AI Gigafactory.
On funding, there is a call for faster, simpler state aid processes (including for IPCEIs), special (read: subsidised) energy prices for energy-intensive industries, and various commitments to invest in critical infrastructure (e.g., to strengthen the cybersecurity of critical infrastructure, launch a “digitalisation offensive of energy network operators”, subsidise EV uptake and EV infrastructure, etc.)
The government also announced to open public funding to the defence industry and overhaul Germany’s sluggish defence procurement system (Commission President von der Leyen has firsthand experience with this thorny issue). The agreement also calls for the creation of a European defence single market.
On the next EU long-term budget (MFF), the German line is, well, German. Financing outside the MFF needs to remain the exception and NGEU repayments need to start on time. The MFF needs to be modernised to be simpler, more transparent and more flexible. And, positively, Europe would need to better support its security and sovereignty, including on critical technologies, energy security, “digital sovereignty including European platforms”, protection of critical infrastructure, resilience, and defence.
The new government also makes an unambiguous commitment to continue supporting Ukraine and (finally) establishes a National Security Council, housed in the Chancellery. The coalition also agreed tougher migration policies, and, notably, calls for improving EU decision-making by expanding qualified-majority voting in the Council via the passerelle clauses in EU treaties.
In terms of responsibilities, the Social Democrats will take charge of the Finance Ministry (held by the Liberals under the last government) and keep Defence. The Conservatives will lead Economics, the new Digital Ministry and, for the first time since the 1960s (!), the Foreign Ministry.
Next steps: SPD members still need to approve the agreement by 30 April, after which the Bundestag can vote to approve Friedrich Merz as chancellor in (likely) early May.
Fabian Bohnenberger 