BERLIN: German election winner Friedrich Merz’s conservatives and outgoing Chancellor Olaf Scholz’s Social Democrats (SPD) held “open and constructive” talks towards forming a coalition, a joint statement said on Friday (Feb 28) without giving details.
Parliamentary arithmetic means the centre-left SPD is the most likely ally to help Merz’s conservatives form a new governing majority, but there is ill-feeling between the parties after a bruising election campaign.
Investors are watching what price the SPD will demand to join a government and whether parties will agree to a massive new defence fund and reforms to borrowing limits known as the “debt brake”, either in the outgoing parliament or the next.
Economists and investors want a rapid easing of the debt brake to lift Europe’s largest economy out of the doldrums and fund an overhaul of Germany’s military, which has taken on urgency with Donald Trump back in the White House and dealing with Russia over the heads of Europe on ending the Ukraine war.
“The exploratory talks began in an open and constructive atmosphere,” said a statement after several hours of talks at which the outgoing finance minister, Joerg Kukies, also gave an overview of the state’s finances.
Discussions will continue next week.
