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Expectations from the new German Grand Coalition

Fri, 02/09/2018

By Sebastian Nikoloff, Director and Team Lead Corporate & Public Affairs at MSL in Berlin, Germany

  • After marathon negotiations, the new coalition agreement between CDU/CSU and the SPD was finalised in 13 chapters and 177 pages.
  • The coalition talks were the shortest in history, lasting just little over a week.
  • As it stands, the grand coalition will the most expensive in history with an overall €46 Billion earmarked for allocation and investments.
  • What are the key general trends and policies, points of reference and possible path ahead for the legislative term under a likely grand coalition government?

The unusually long (and heavy) title of the coalition agreement “New departure for Europe, A new dynamism for Germany, A new cohesion for our country,” reveals some political focal points of the grand coalition. Overall, the coalition agreement reads like an elaborate collection of hard-fought compromises (the smallest common denominator) with little vision, foresight, or optimism. In terms of power structure, much has shifted since the general elections in September 2017.

As evident from the coalition agreement, the position of Chancellor Angela Merkel and her CDU has weakened: With the Ministry of Finance and the Ministry of the Interior she lost two key portfolios. Her role and leadership will not be undisputed and there are clear provisions in the coalition agreement to expose her to more parliamentary scrutiny. Furthermore, there remains a likelihood that the legislative term might come to a premature end with early re-elections.

Europe: an easy compromise?

The topic of Europe seems to be where the easiest compromise was established. The three parties committed themselves to a strong and new vision for the EU and a more active German role. The additional allocated budgetary resources underline a very clear commitment of a stronger role for Brussels. The French-German cooperation is to be reinforced.

The Ministry of Finance, under former finance minister Wolfgang Schäuble, used to be one of the most important portfolios to shape and assert German policy towards Europe. In addition to the Federal Chancellery, the SPD now looks to staff the Foreign Office in addition to the Ministry of Finance. This will give the forthcoming policy on Europe a markedly more social democratic touch which is likely to lead to increasing conflict and scrutiny between the Chancellor and the SPD portfolios.

The social democratic staffing will be inclined to introduce new taxation schemes, as well as to put a stronger spotlight on the social responsibility of large companies.

Education and qualification: investing in the future

In order to keep pace with the new dynamics of changing educational requirements, the coalition parties committed themselves to vocational education and training to shape transformation to an increasingly digital workforce. Extending and strengthening programs such as the “digitization” of inter-company vocational training centers provide a huge opportunity for digital players to engage through partnerships in the private and public sector. With the Ministry of Labour and Social Affairs set to remain in the hands of the SPD, the party will continue to pursue an ambitious social agenda. The commitment by the grand coalition parties to ensure the ongoing qualification of the workforce, also applies to the sectors of education.

Research expenditures are expected to rise to 3.5 percent of gross domestic product by 2025. More than eleven billion euros are to be invested in education and research over the next four years helping to provide better digital equipment to schools. This is another area of broad consensus between the coalition parties backed up by a strategy and investments. The area of education policy could present huge potential to further expand cooperation, as the demand for investment in digital skills and infrastructure is ever-increasing.

Infrastructure and Economy

Even if hardly ambitious, investment in infrastructure and key technologies have been placed high on the agenda and the coalition parties clearly recognized -- at least on the campaign trail -- the importance of investment in networking and digitization strategies in order to increase Germany’s competitiveness. The agreement, however, seems way less ambitious. A target of gigabit network coverage by 2025 and a legal claim for fast Internet access seem to come years too late. Government agencies will have to provide services online - from 2022 onwards. Germany’s staggeringly low ranking in digital progress of developed countries is a particular point of criticism.

Many associations and businesses were quick to criticize the agreement's lack of political foresight. They concluded that the coalition treaty was sending out conflicting signals. They welcomed the investment commitments -- better education and qualification schemes, digital infrastructure and digital transformation, commitment towards the EU -- but fear the future burden on businesses, particularly the lack of tax cuts. Especially with the US and the UK recently amending their tax schemes, associations and businesses are unhappy with the relative business-unfriendly coalition agreement.

Little vision, foresight, or optimism – that’s what comes to mind when reading through the agreement. All parties are somewhat reluctant to the current constellation. So who knows – maybe we will see another government – and maybe more vision – in the not too distant future.


Sebastian leads the Berlin team of MSL, focusing on corporate and public affairs. He was previously a senior consultant in public affairs and reputation in the fields of food, technology and infrastructure.

Sebastian Nikoloff


For more information contactSebastian Nikoloff, Director, and Team Lead Corporate & Public Affairs, MSL Germany

 T: +49 30 82082-513 | | @SebNikoloff

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