06:12 AM EDT, 05/05/2025 (MT Newswires) -- Germany is set to get a new "Grand Coalition" government and a new prime minister in the shape of CDU leader Friedrich Merz, said Societe Generale.

Having reached a coalition agreement in early April, including agreement on fiscal stimulus -- corporate tax and electricity price support -- an agreement has now also been ratified by the respective parties, allowing for the new government to be voted in on Tuesday, wrote the bank in a note to clients.

Key ministerial positions will be held by: finance Lars Klingbeil (SPD), foreign ministry Johann Wadephul (CDU), defense Boris Pistorius (SPD), interior Alexander Dobrindt (CSU), stated SocGen.

A first key decision for the new government will be to prepare the 2025 budget, which should contain tax breaks and welfare spending of around 20 billion euros, or 0.5% of GDP, and which should boost the economy relatively fast and counter the negative headwinds from the United States tariffs, added the bank.

In the coming years, sizeable military and infrastructure spending will also support growth, but further structural reforms are needed to boost the low potential growth rate more sustainably.