The deal follows weeks of negotiations as Europe faces uncertainty over sweeping tariffs imposed by the United States.

Before Merz can take the helm, the coalition deal needs approval in a ballot of the Social Democrats’ membership and by a convention on April 28 of Merz’s Christian Democratic Union party.

The Associated Press / From left on stage, Markus Soeder, chairman of Bavarian’s Christian Social Union party, Friedrich Merz, Christian Democratic Union party chairman and the Social Democratic ...