German government coalition deal agreed

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Angela Merkel’s conservative Christian Union (CDU/CSU) have agreed a coalition deal with the Social Democrat (SPD) party to become German chancellor for a third term. In the September election the CDU won 41.5% of the vote and the SPD won 26%, with the remainder shared between the Greens and the Left Party.

Two months after the elections in Germany, and 17 hours of negotiations later, both sides signed a 185-page agreement called “Shaping Germany’s Future”.

The agreement bridges the gap between the two previously opposed parties, with the Christian Democrats ensuring that taxes will not increase and the Social Democrats achieving a national minimum wage of €8,50 and lower retirement age of 63 for pension contributing workers. Additional key points of the deal include dual citizenship for children born in Germany after 1990 to foreign parents, 40-45% energy production to be from renewable sources by 2025, and levies on German motorways for foreign motorists.

In terms of debt the cross party agreement stated that Germany would be opposed to the mutualisation of Eurozone debt and that from 2015 there would be no new debt at federal level. Government spending will be offset by incomes and it thought that German policy will largely remain unchanged by the new coalition.

Angela Merkel and leader of the SPD Sigmar Gabriel announced the deal on Wednesday. Merkel said that the coalition would provide “solid finances, secure prosperity and social security”. Cabinet posts will not be decided until after the SPD vote.

Finally reaching a decision with regard to the political future of Germany has positively affected German shares which are currently the highest achieving in Europe. This indicates that investors and traders are pleased by the coalition. Merkel herself is also in a better position, as having the majority in her favour means she faces less opposition when it comes to German participation in Eurozone financial matters.

The two parties look to have a strong platform but their job stabilising the European economy as well as managing Eurozone banking and debt difficulties will certainly not be easy.