Coalition Agreement: Key Issues and Outcomes for CDU and SPD

In a bid to unify their factions following a contentious election campaign, the leaders of the CDU/CSU and SPD unveiled their coalition agreement in Berlin's Paul-Löbe-Haus. Friedrich Merz, Markus Söder, Lars Klingbeil, and Saskia Esken positioned themselves as a cohesive team, aiming to reinvigorate Germany's economic landscape, promote entrepreneurship, and simplify the process of home ownership.

However, the coalition is not as unified as it appears. Prior to the announcement of the coalition agreement, CDU representatives were actively communicating their successes in negotiations via messages that highlighted their victories over key issues. Their goals included the abolition of the citizen's allowance, the removal of the supply chain law, and the introduction of a tax-free 'active pension.' This reflects the urgency to appease a discontented party base.

Analysis of the coalition agreement reveals a mixed outcome for both parties. In financial policy, both the SPD and CDU achieved significant concessions. The SPD successfully negotiated a 500 billion euro fund aimed at public infrastructure and climate protection investments even before formal negotiations began. During discussions, the SPD also countered the CDU's plans for substantial tax relief for workers and businesses. Nonetheless, the CDU managed to secure a delayed reduction in corporate tax rates and tax incentives for working retirees, commuters, and those working overtime. Moreover, they succeeded in blocking SPD proposals for increased taxes on high earners and wealthy individuals.

On the investment front, the SPD's proposal for a 'Germany Fund' found its way into the coalition agreement, with the federal government committing 10 billion euros to stimulate private investments of at least 90 billion euros. This fund aims to support growth-oriented companies through guarantees and equity participation.

In environmental policy, a significant shift occurred as the management of climate policy was transferred from the Ministry of Economy to the Ministry of Environment, aligning with the CDU's demands. The coalition also plans to abolish the existing heating law introduced by Robert Habeck of the Green Party. Nevertheless, climate objectives remain intact, leading to a new reform of the building energy law, characterized by increased technological flexibility. Popular initiatives, such as incentives for replacing heating systems, will continue under the new coalition, although the CDU's call for a review of a potential return to nuclear energy did not make it into the agreement.

In the realm of social policy, the CDU succeeded in renaming the citizen's allowance to 'basic security for job seekers,' reinforcing the focus on increasing employment participation among recipients. Conversely, the SPD managed to incorporate its demand for enhanced yearly pension increases into the agreement, albeit with some limitations. The CSU's long-standing initiative regarding the 'mother's pension' was also included despite prior assertions from CDU officials against further enhancements.

Discussions around the minimum wage remain ambiguous, with the SPD advocating for a raise to 15 euros per hour mentioned without a firm commitment from the coalition.

In the days following the agreement's announcement, both parties' strategists will work to frame their respective achievements as pivotal victories to their members. The true measure of their success will be revealed during the SPD's member vote and the CDU's upcoming party congress, as discontent continues to simmer within the ranks of both parties.