07:40 AM EDT, 10/10/2025 (MT Newswires) -- Germany needs serious reforms and Prime Minister Friedrich Merz of the center-right CDU would like to implement them, said Berenberg.

However, the premier needs the center-left SPD to agree.

Finance Minister Lars Klingbeil, who is also vice prime minister as well as co-leader of the SPD, has a choice: he can either cajole the SPD to accept the partly painful pro-growth reforms, or he can stick to old SPD positions, which are no longer tenable in a rapidly aging country, according to the bank.

In its coalition with Merz, the SPD has moved somewhat in the right direction. But it still falls far short of what is required, stated Berenberg.

The most likely outcome amid plunging popular support, the SPD accepts further reforms, but not enough to resolve the problems, added the bank.

After the 2029 parliamentary election, the next government will likely have to finish the task under far more difficult conditions unless Klingbeil makes the right choice now, pointed out Berenberg.