Social Democrat Lars Klingbeil to become Germany’s next finance minister

Stay informed with free updates

Simply sign up to the German politics myFT Digest — delivered directly to your inbox.

Social Democrat co-leader Lars Klingbeil will become Germany’s next finance minister, putting him in charge of the purse strings of Europe’s largest nation as it prepares to unleash hundreds of billions of euros to overhaul its infrastructure and its armed forces.

Klingbeil’s powerful role in the next government, which will also be combined with the position of vice-chancellor, was confirmed on Wednesday as his party announced that its members had approved a coalition deal with the centre-right Christian Democrats (CDU).

That paves the way for CDU leader Friedrich Merz to be elected as the country’s next chancellor by the German parliament next week.

Klingbeil, 47, led the Social Democrats (SPD) to their worst result since 1887 in February’s nationwide elections, when his party finished third with 16 per cent amid deep voter anger towards the previous SPD-led government headed by Chancellor Olaf Scholz.

But Klingbeil, a career politician who has earned a reputation as a shrewd political operator, managed to deflect responsibility for the outcome and led the party’s coalition negotiations with the CDU.

He was seen within the SPD as having deftly navigated those talks, securing a €500bn fund to invest in Germany’s neglected infrastructure in exchange for agreeing to loosen the nation’s strict borrowing rules to enable unlimited spending on defence.

He and SPD co-leader Saskia Esken secured seven ministries for their party, versus 10 for the CDU and its Bavarian sister party, and secured backing for their campaign pledges including tax cuts for lower earners, protections for pensions and a provisional commitment to a €15 minimum wage.

Although the SPD youth wing vowed to reject the deal, raising objections to elements including its tougher stance on migration, the party base approved the agreement by almost 85 per cent. It will be signed on Monday, with Merz’s election as chancellor taking place the following day.

Klingbeil’s most pressing task will be to draw up a budget for 2025 to replace the provisional one enacted as a stop-gap after the premature collapse of the last government, as well as a budget for 2026.

He will take over the reins of the ministry from former Goldman Sachs banker Jörg Kukies, and will need to draw up a plan for spending the €300bn of the €500bn infrastructure fund that is earmarked for spending on a federal level.

The fund is a central plank of the next government’s plans to revive the stagnating economy, which is suffering the most protracted slump in its postwar history.

Klingbeil, the son of a Bundeswehr soldier, does not have a background in finance or economics. He studied political science at university and, since first entering parliament at the age of 27, has gravitated towards foreign policy.

But he was expected to compensate for his lack of expertise by surrounding himself with a strong team, said Jens Südekum, a professor of international economics at Düsseldorf’s Heinrich Heine University who has acted as an informal adviser to Klingbeil.

While Klingbeil was “obviously not a Schäuble type” — a reference to Germany’s famously hawkish CDU finance minister Wolfgang Schäuble, who died in 2023 — Südekum said that he would be more prudent than some observers might expect.

“He likes to be seen as the adult in the room. The guy who makes sure that the federal government acts responsibly,” Südekum said.

Klingbeil has built a strong working relationship with Merz, with the two men agreeing last month to address each other using the informal German “du”.

Marion Mühlberger, economist and political analyst at Deutsche Bank Research, said that markets would be focused on “how quickly the new government draws up the budget” and whether it can pass before summer break.

The SPD said that the rest of its picks for the cabinet would be announced at the latest on Monday.