Germany’s Future Coalition Faces a Tough Choice on Global Development as US and UK Pull Back

"Now is the time for decision-makers to recognise that development policy is an essential pillar of Germany’s broader strategic and economic interests."

On February 23, German voters headed to the polls to elect a new Bundestag. As predicted, the conservative CDU and its sister party, the CSU (the Christian Democratic Union of Germany and the Christian Social Union in Bavaria), secured the top spot with 28.5 percent of the vote. The far-right Alternative for Germany (AfD) came in second, with 20.8 percent, while Chancellor Olaf Scholz’s Social Democrats (SPD) came in third at 16.4 percent. CDU leader Friedrich Merz wasted no time in signaling his intent to form a coalition with the SPD—and to keep the AfD out of power.

In a move that may surprise many in Germany—a country known for its strict fiscal discipline—the CDU/CSU and SPD leaders have since announced plans to amend the constitution to ease restrictions on defence spending. The proposed change, which Germany’s outgoing parliament is set to discuss, would allow defence spending above 1 percent of GDP to bypass the country’s strict debt limits. If approved, this would mark a significant shift in Germany’s traditionally cautious approach to public debt.

As coalition talks unfold in such a challenging geopolitical environment, with limited fiscal space, one critical question looms: What will this mean for Germany’s future as the world’s third-largest aid donor (in 2023) and a leading provider of global assistance?

With the US pulling back from development assistance, the UK cutting the aid budget to fund an increase in defense spending, and many traditional donors giving less and less to poorer countries, Germany must decide whether to follow suit—or stand firm in its commitment to global solidarity and to tackle global challenges. In this blog, we explore what party negotiators should consider to ensure international cooperation remains high on the next government’s agenda.

A smarter approach to development for the new coalition

Germany should seize this opportunity to assert its position as a global leader in development cooperation, rather than following the US and UK in cutting aid. With the right reforms, Germany can ensure its development policy an effective lever of soft power, ensuring value for money while forging stronger, long-lasting partnerships that benefit both its citizens and communities abroad.

So, how can the next government modernize its approach to meet today’s and tomorrow’s challenges? The following points outline key reforms to enhance Germany’s impact on global development:

Strengthening development policy as a tool of soft power
In times of geopolitical tension, development policy is a key tool for safeguarding Germany’s security and prosperity. Its financing should partly draw on the country’s two newly established special funds for defense and infrastructure. Meanwhile, as discussions continue about merging the Ministry for Economic Cooperation and Development (BMZ) into the Foreign Office or another ministry, party negotiators should proceed with caution. The UK’s experience shows that such a move can lead to a loss of expertise, consume valuable time, and distract from more pressing reforms.

Building new partnerships and strengthening multilateralism
Germany should more actively build up partnerships with other countries and also engage with countries that may not share all its core values, but with whom it has common interests. This should include collaboration with China where strategic goals align. Multilateral institutions can play a key role in fostering these partnerships and as an export nation, Germany has a vital interest in maintaining a functional, rules-based international order. For instance, the expansion of the World Bank’s core mandate to include global public goods was only possible with China’s backing. To strengthen its influence, Germany should push for consolidating EU chairs into a single European representation at the World Bank and regional development banks. At the same time, it must demonstrate stronger commitment to reform and to addressing the Global South’s systemic underrepresentation to keep these institutions central to the global order.

In addition, and in light of the upcoming negotiations of the EU’s next seven year budget (2028-2034), Germany should show leadership and ensure that EU institutions remain a key global donor committed to poverty reduction and human development.

Recognising development policy as a strategic interest
Development policy isn’t just about altruism, it’s a strategic investment in Germany’s long-term interests. But to be effective, these interests must be clearly defined and focused on also supporting global public goods, such as climate protection and stability. This includes helping fragile countries, as evidence shows that investing in economic growth and political stability can be up to 100 times cheaper than dealing with future conflicts and their aftermath.

Germany should see development policy as a core pillar of its broader defense and security strategy—an approach the CDU/CSU has already endorsed in its manifesto. However, to make this vision a reality, policymakers must address the decreasing public support for foreign aid among German voters. They need to clearly communicate how a strategic, well-targeted development policy benefits everyone—at home and abroad.

Enhancing political oversight and ensuring value for money
Germany’s development structures need stronger political leadership, reduced bureaucracy in project planning, and an overhaul of implementation frameworks to improve efficiency and impact. It should also ensure to follow the prior lead of USAID and other donors to prioritise evidence-based policymaking. Integrating rigorous evidence into program design and implementation is crucial for maximising development outcomes, the scaling of effective interventions and the discontinuation of those that are less successful. This contributes to optimal resources allocation, ensures that German taxpayers receive the best value for their contributions, thereby building greater public trust in its development investments.

Also, Germany’s humanitarian aid budget has surged in recent years, but responsibilities remain split between the Foreign Office and BMZ, creating inefficiencies. Given the consensus that humanitarian aid should align more closely with long-term development efforts, ensuring seamless cooperation between these agencies is critical.

Prioritising transformation
Rather than fragmented, short-term projects, Germany should prioritise large-scale, donor-coordinated programs that are deeply integrated into partner countries' governance and development frameworks. These initiatives should target countries that demonstrate a strong commitment to such partnerships, similar to the model of Just Energy Transition Partnerships (JET-Ps). To enable this shift, Germany must adopt a more flexible approach to program funding, moving away from rigid country quotas and instead allocating resources based on strategic priorities, demonstrated need, and potential for sustainable impact.

Conclusion

As Germany’s political landscape shifts and fiscal pressures mount, the CDU/CSU and SPD coalition agreement negotiators face a defining moment and rare opportunity in enhancing their approach to global development. While defense spending reforms, security issues and lagging economic growth dominate coalition talks, development cooperation must not become an afterthought.

Germany has an opportunity to lead by example—leveraging its economic strength, multilateral influence, and strategic interests to drive a more effective, evidence-based, and forward-looking development agenda. Now is the time for decision-makers to recognise that development policy is an essential pillar of Germany’s broader strategic and economic interests.