Conservative and center-left parties reached a deal to form a new German government on Wednesday after weeks of negotiations, paving the way for new leadership in Europe’s biggest economy after months of political drift.

Germany's conservatives under Friedrich Merz reach a deal with the Social Democrats to govern Europe's biggest economy.

Conservative and center-left parties will present a deal to form a new German government on Wednesday after weeks of negotiations

German conservatives under Friedrich Merz clinched a coalition deal with the centre-left Social Democrats (SPD) on Wednesday, aiming to revive growth in Europe's largest economy just as a global trade war threatens recession.

The chancellor-in-waiting's conservatives have reached a coalition agreement with Germany's Social Democrats, five months after the last government collapsed.

Friedrich Merz sealed a coalition deal with the Social Democrats, paving the way for the German conservative leader to become chancellor at a time of acute domestic and geopolitical turmoil.

The European Union cleared retaliatory tariffs against the United States, while China imposed its own levies as President Donald Trump's "reciprocal" tariffs on dozens of countries around the world took effect.

European Commission President Ursula von der Leyen welcomed President Donald Trump's 90-day pause on his tariffs, and said the EU is committed to working towards "frictionless" trade with the U.S. But she made clear the EU sees its trading future as largely outside of the U.

Eurozone government bond yields jumped, led by Bunds, after Trump’s 90-day pause on reciprocal tariffs on most countries barring China.