Merz seals grand coalition deal promising defence spending and migration crackdown

Friedrich Merz stood before the cameras on Wednesday afternoon and declared that Germany had turned a corner. After weeks of negotiation, the Christian Democratic Union leader and his Social Democratic partners had sealed a coalition agreement that gives them a 13-seat majority in the new Bundestag. The 69-year-old, who has never served as a cabinet minister, will be elected chancellor in the week beginning 5 May. His message was deliberate: a strong government capable of action, a country ready to meet its defence commitments, and a signal to Washington that Berlin is once again a reliable partner.

A coalition built on urgency

The agreement arrives after months of political paralysis. Germany has been in recession since late 2023, its export-dependent economy squeezed by high energy costs, weak Chinese demand and, most recently, the tariff barrage launched by the Trump administration. The CDU won February's federal election but fell short of a majority, leaving Merz dependent on the SPD to form a government. Both parties felt the pressure of an electorate that handed the far-right Alternative for Germany its strongest result since the war. The coalition parties moved with unusual speed last month to rewrite the constitutional debt brake, a reform that cleared the way for a massive off-budget fund to finance military procurement and infrastructure renewal. That vote, passed with the support of the outgoing parliament, was the clearest signal yet that the new government intends to spend.

Migration: the voter priority

Wednesday's agreement places migration control at the centre of the domestic programme. The text promises measures to 'control and largely end irregular migration' and introduces border controls aimed at addressing the issue that dominated February's campaign. The language is tighter than anything the SPD would have accepted in previous grand coalitions, reflecting the political reality that the AfD's rise has shifted the centre of gravity. Yet the far right was unimpressed. Alice Weidel, the AfD co-leader, dismissed the plans as insufficient and accused Merz of capitulating to the Social Democrats. Her party's poll numbers suggest the criticism resonates: an Ipsos survey released the same day put the AfD on 25%, one point ahead of the CDU.

Defence continuity and the Swedish model

The most striking personnel decision is the retention of Boris Pistorius as defence minister. A Social Democrat who has earned respect across party lines for his blunt assessment of the Bundeswehr's shortcomings, Pistorius will oversee the implementation of the coalition's military ambitions. The armed forces commissioner's recent report to parliament painted a grim picture: shortages of ammunition, personnel and serviceable barracks across the board. The coalition answers with a pledge to raise defence spending and expand the Bundeswehr, but without reintroducing conscription. Instead, Merz pointed to a 'Swedish model' of voluntary military service, hoping that enough volunteers will step forward to fill the ranks. Whether that hope survives contact with demographic reality remains an open question.

The fiscal architecture

The debt-brake reform passed in March is the financial engine of the new government. By creating a special fund outside the regular budget, the coalition can channel hundreds of billions of euros into defence and infrastructure without technically breaching the constitutional limit on structural deficits. The mechanism mirrors the Sondervermögen established after Russia's full-scale invasion of Ukraine, but on a larger scale and with a broader mandate. Critics on the left and right argue that it circumvents parliamentary scrutiny; supporters say it is the only way to modernise a country whose bridges, railways and digital networks have been neglected for two decades. The European Commission will watch closely: Germany's fiscal stance sets the tone for the euro area, and Brussels has long urged Berlin to invest more.

Ukraine and the transatlantic test

Merz promised 'comprehensive support' for Ukraine, a formulation that aligns with the outgoing government's policy but carries added weight given the uncertainty in Washington. The Trump administration's tariff threats and its scepticism towards NATO have concentrated minds in Berlin. Pistorius has been a vocal advocate for European defence autonomy, arguing that the continent must be able to act without American leadership if necessary. The coalition's commitment to higher defence spending is partly a response to that pressure. Yet the government will also have to navigate the trade war: Germany's carmakers and machinery exporters are directly exposed to US tariffs, and the recession makes any retaliatory escalation politically painful.

The populist flank

Sahra Wagenknecht, whose eponymous alliance entered the Bundestag in February, offered the sharpest critique from the left. She warned that Germany faces a third and fourth year of recession, a scenario she labelled 'Merzession'. Her argument is that the coalition's mix of supply-side reforms and military spending does nothing for purchasing power or industrial competitiveness in the short term. The AfD, meanwhile, frames the government as a continuation of the status quo, only harsher on migration. With both populist forces polling strongly, the new chancellor will face a Bundestag where the combined opposition of the far right and the populist left could complicate legislative business, especially on European policy.

What happens next

The coalition agreement must still be approved by the membership of both parties. The CDU holds a digital party conference on 28 April; the SPD will ballot its members in the same week. Neither leadership expects a revolt, but the SPD base has rejected coalition deals before. Assuming ratification, the Bundestag will convene on 6 May to elect Merz as chancellor. His 13-seat majority is comfortable but not generous; a handful of dissenters could make votes awkward. The first test will be the supplementary budget to activate the new special fund, likely before the summer recess. After that, the government's credibility will be measured in delivery: whether the money reaches the barracks and the building sites, whether migration numbers move, and whether the AfD's poll lead proves a blip or a trend.