Pressure from abroad and at home

The market turbulence caused by U.S. President Donald Trump’s announcement of sweeping tariffs added to pressure for Merz’s Union and the Social Democrats to bring their coalition talks to a conclusion.

The tariffs threaten to add to the woes of an export-heavy economy that shrank for the past two years, and generating growth will be a central task for the new government.

Increasing doubts about U.S. commitment to European allies also played into the prospective coalition’s decision to enable heftier defense spending. Merz said last month that Germany and Europe must quickly strengthen their defense capability and that “‘whatever it takes’ must also go for our defense now.”

Another factor in the haste to reach an agreement was a decline for the Union in the opinion polls, showing support slipping from its election showing, while the far-right Alternative for Germany, which finished a strong second in February, gained as the political vacuum persisted.

The prospective new coalition brings together what have been post-World War II Germany’s traditional big parties, but the Union’s election-winning performance in February was lackluster and the Social Democrats dropped to their worst postwar showing in a national parliamentary election.

Together, they have 328 seats in the 630-member lower house of parliament, the Bundestag.