Germany is set to welcome its new government after the Social Democratic Party (SPD) formally agreed to back a coalition.

The result of the agreement will see the Christian Democratic Union (CDU) leader, Friedrich Merz, become the country’s next Chancellor.

Under the deal, the SPD’s Finance Minister, Lars Klingbeil, will take the role of Finance Minister within the coalition. It is expected that the new government will take office in the middle of next week.

SPD members were invited to vote on the proposed coalition deal, the Koalitionsvertrag, last week. It was reported by Reuters that 56 per cent of the party’s 360,000 members voted, with 84 per cent being in favour of the deal.

The agreed-upon Koalitionsvertrag offers no real change to what Merz and his incoming administration have offered in the past.

According to the newest reiteration of the Koalitionsvertrag, there will be:

1) The maintaining of the pension level of 48 per cent until 2013, with additional funding from tax revenues to cover the associated costs.
2) A review in four years to assess the development of contributions and federal subsidies, with potential adjustments based on economic factors such as employment rates and wage growth.
3) A new pension scheme to be introduced by the beginning of next year called Fruhstart-Rente, which will look to provide early retirement options.
4) A government contribution of €10 per month for every child between the ages of six and 18 so that they can start their own third-pillar pension.
5) Efforts to strengthen occupational pensions, such as digitalisation, simplification, and portability between employers.

Other measures include:

6) Flexibility in retirement, including voluntary extended work beyond the retirement age. This will be achieved by offering tax-free earnings of up to €2,000 a month.
7) Mothers will receive three pension points for each child, regardless of the child's birth year, funded through tax revenues. This will be known as the Mütterrente.
8) Self-Employed Retirement Security: New self-employed individuals not covered by mandatory pension systems will be integrated into the statutory pension system, with alternative, reliable retirement options remaining available.
9) Improvements will be made to the earning limits for recipients of survivor pensions.
10) Efforts will be made to stabilise contribution rates and simplify procedures, ensuring digital exploitation of artistic works is included in the social insurance system.

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