"Keeping Expectations High" - EU Partners Anticipate Major Moves from New German Government
New German administration faces significant aspirations from EU allies
The emergence of the fresh German government in spring 2025, post the coalition agreement between the CDU/CSU and SPD entitled 'Responsibility for Germany', has set a high bar among Germany’s EU partners. This pact addresses priority areas in EU policy such as the EU budget, economy, climate, security, defense, migration, and institutional reform, though some details are intentionally vague.
Broader Consensus and Reform Drive
Experts see the coalition’s ability to bridge differing viewpoints as a valuable chance for the EU. There is optimism that a united government can spearhead reforms, especially in economic and security policy, beefing up the EU as a whole.
Franco-German Alliance Revival
EU partners, particularly France, are hopeful for a Franco-German partnership resurgence. Although differences persist—like the Mercosur trade agreement and nuclear energy—both parties are willing to collaborate and seek common ground, with requests for the Merz-Macron duo to spearhead ambitious EU initiatives and strengthen ties with Poland.
Economic Stimulation and Fiscal Responsibility
The new government introduced an expansive spending package worth €1 trillion, focusing on defense, infrastructure, and climate. Short-term growth may benefit from this stimulus; however, concerns linger regarding long-term sustainability and the eurozone's impact, especially after Germany temporarily suspended its debt brake to enable this spending.
Economic institutes forecast the stimulus to add about 0.5 percentage points to growth, even as Germany grapples with recession and protectionist trade measures.
Implications for the EU
Economic Stability and Growth
The German stimulus could counterbalance recessionary pressures in the EU, but long-term effectiveness hinges on matching fiscal responsibility with growth-promoting policies to avoid excessive deficits and inflation.
Geopolitical and Security Challenges
The coalition is faced with pressure to provide a united European response to geopolitical turmoil, especially in light of the re-elected US administration's early actions. Solidarity on security, migration, and climate policy is deemed essential.
Institutional Reform
The coalition's pledge to vague yet broad reforms presents an opportunity for progress on EU institutional strengthening, but specifics and ambition will be key.
European partners, including the UK, Czech Republic, Finland, and Austria, shared optimism about the incoming German government. While acknowledging the challenges, they emphasize the need for united leadership in addressing the EU's most critical issues and driving forward reforms to ensure the bloc's longevity and success.
- The German government, built on the coalition agreement 'Responsibility for Germany', is anticipated to implement significant policy changes in various areas, including community policy, employment policy, and policy-and-legislation, under the scrutiny of Germany’s EU partners.
- As the new coalition government consists of members from German parties German and SPD, their approach towards geopolitical situations, particularly war-and-conflicts, is of interest to European ministers, in light of the re-elected US administration's early actions.
- In terms of employment, the new German government is expected to make considerable strides, considering the focus on economy, climate, and security within the EU policy outlined in the coalition agreement, often referred to as employment policy.
- As the German government introduces a €1 trillion spending package, encompassing defense, infrastructure, and climate, experts from general-news and economic institutes predict that the stimulus could lead to growth, but they also voice concerns about long-term sustainability and the impact on the eurozone, especially after temporarily suspending the debt brake.
- The emergence of the German-led coalition also inspires optimism in several European countries such as France, the UK, Czech Republic, Finland, and Austria. They believe this coalition has the potential to address the EU's most pressing issues, including the general-news matters of economic stability, security challenges, and institutional reform, using a united and proactive approach.
