CDU/CSU and SPD present exploratory results

The CDU/CSU and SPD have tackled the first obstacle on the path to forming a coalition government. After completing the exploratory talks, coalition negotiations between the parties are scheduled to start on Thursday. The results of the exploratory talks, set out in a joint paper, touch on the focal topics of the car industry, ESG, energy and digital policy. The overarching goal of the CDU/CSU and SPD is to make the German economy more competitive and achieve new economic growth.

I. Maintaining the car industry as Germany’s leading industry

The car industry and the jobs it provides is to remain Germany‘s leading industry. To this end, the CDU/CSU and SPD are focusing on “technology openness” and aim to actively work towards averting penalties for exceeding fleet-wide emissions limits. At the same time, e-mobility is to be promoted with purchase incentives. Suppliers are also to be supported in handling the transformation. As far as this latter topic is concerned the exploratory paper does not outline any specific measures.

II. Energy: Focus on electricity costs

In the energy sector, the CDU/CSU and SPD primarily want to ensure competitive energy prices. In the first step, electricity tax is to be reduced for everyone to the European minimum and transmission grid charges halved. The aim is a saving of at least five cents per kWh and permanently capping grid charges. In addition, the CDU/CSU and SPD aim to extend the rules of electricity price compensation to other energy-intensive industries and would like to lengthen compensation periods. Grid expansion is to be driven forward fast, cost-efficiently and in a targeted manner.

The energy offering as a whole is to be increased to stabilise and reduce electricity costs. Reserve power plants are therefore to be used in future not only to avoid shortfalls in supply, but also to stabilise the electricity price. A power plant strategy still to be developed is set to incentivise the construction of up to 20 GW of gas power plant output by 2030. All the potential of renewables is also to be leveraged. To this end, the grid-relevant expansion of bioenergy, hydroelectric power, geothermal energy and storage capacity will continue to be promoted.

Finally, immediately after the start of the legislative period, a package of laws is to be adopted to enable carbon capture and storage (CCS) especially for industrial emissions that are hard to avoid.

III. Digital matters

The CDU/CSU and SPD want to make greater use of the opportunities of artificial intelligence and digitalisation as these are central to modernising the state. To do so, a “huge” increase in R&D funding is needed. In concrete terms, the plan is to expand in particular the nationwide options for contacting government bodies digitally, linking up data registers and automating administrative processes. Access to digital services is also to be facilitated by introducing an all-purpose citizen’s account. There also needs to be a new allocation of powers among the federal, regional and local governments.

IV. ESG: Climate protection measures

In their exploratory paper the CDU/CSU and SPD have committed to the German and European climate targets. In climate policy, they aim to focus on market-oriented instruments by creating lead markets for climate-neutral products. To this end, the CDU/CSU and SPD are planning to set quotas for climate-neutral steel, a green gas quota and standards for procurement law, for example. How and whether these procurement law standards will be designed remains to be seen.

Finally, the CDU/CSU and SPD have set the goals of making energy-intensive industries carbon-neutral. To achieve this, as mentioned above, immediately after the start of the legislative period a package of laws is to be adopted to enable carbon capture and storage (CCS), especially for industrial emissions that are hard to avoid. The core hydrogen grid will also need to connect the industrial centres across Germany, the parties say.

On the other hand, corporate due diligence obligations in the supply chain, such as those defined by the German Supply Chain Due Diligence Act (Lieferkettensorgfaltspflichtengesetz), are not covered in the exploratory paper.

V. Other key agreements: Debt brake, cutting red tape and many standalone measures

To fund government spending, the CDU/CSU and SPD have agreed on a reform of the debt brake. In the first step, special funds for infrastructure are to be introduced by the parliamentary majority of the current 20^th Bundestag, and a partial exemption from the debt brake is to be created for defence spending (see our article of 6 March 2025). The amendment to the constitutional requirements for permitted national debt would open up a substantial financial scope for a new federal government. Whether a resolution can be passed before the 21^st Bundestag convenes cannot be predicted, however. For instance, the Greens and their parliamentary faction recently said they did not intend to vote for the proposed constitutional changes. But the CDU/CSU and SPD together do not have the necessary qualified majority in the 20^th Bundestag.

The partial exemption for defence is outlined in the exploratory paper as follows: According to the individual federal budget plan no. 14, defence spending is to make up 1% of GDP within the scope of the constitutional debt brake. Defence spending above the limit according to budget plan no. 14 will not be counted towards the debt brake. The CDU/CSU and SPD agreed in the exploratory paper that the funds will have to be quickly taken from the special fund for the German armed forces. To increase defence capability fast and efficiently, in the first six months after forming a government the CDU/CSU and SPD plan to draft a planning and procurement bill for the armed forces and submit a priority list of armaments to be procured rapidly, to be drawn up in close coordination with the Ministry of Defence.

Red tape is to be cut by eliminating reporting, documentation and statistical obligations. The CDU/CSU and SPD aim to base their plans on the proposal by the Council for the Review of Regulations to cut bureaucracy cost for companies by 25% in the next four years. However, the exploratory paper does not make any specific proposals. In addition, the legally prescribed number of company officers is to be decreased.

Further emphasis is to be put on innovation and research. The exploratory parties are planning a high-tech agenda for Germany. For example, research into nuclear fusion is to be boosted, and the specific goal of setting up the world’s first fusion reactor in Germany is mentioned.

The parties are also planning a corporate tax reform, while no details are yet spelled out. The goal is to increase incentives for corporate investment in Germany. In particular, strategically important industries are to be kept in or relocated to Germany, such as semiconductors, battery manufacturing, hydrogen and pharmaceuticals. To achieve this, the CDU/CSU and SPD want to seize the opportunities in the European Chips Act and the Important Projects of Common European Interest (IPCEI). Investments are also to be leveraged by establishing investment funds to provide equity and loan capital for investments in conjunction with public guarantees and private capital. 

Furthermore, free trade is to be expanded. For example, four economic partnership agreements that were not adopted during the current legislative period are to be reintroduced with the same wording to the Bundestag and passed. The government also aims to put the Mercosur agreement into force and to enter into new free trade agreements, specifically including with the United States.

CDU/CSU and SPD have identified the recruitment of skilled workers as a key factor in economic success.

The skills shortage is therefore to be addressed with high-skilled immigration. To implement this, bureaucratic obstacles are to be removed, for example by consistently digitalising processes and ensuring faster recognition of professional qualifications. For this purpose, a digital agency for skilled immigration is to be created as a single point of contact for skilled workers from abroad.

The exploratory paper also pays special attention to agriculture and the restaurant trade: the aim is to ease the pressure on restaurants by permanently reducing VAT on restaurant food to 7%. In addition, the CDU/CSU and SPD aim to fully reintroduce the reimbursement of agricultural diesel.