Germany needs a new government fast. The center-right and center-left are set to hammer out an agreement by Easter, but there are several sticking points.

Despite declarations by Friedrich Merz, the likely future chancellor, the future government's road to taking office looks to be long and strewn with pitfalls.

Germany's conservatives and Social Democrats (SPD) on Tuesday held talks on forming a coalition as hopes for buoying Europe's largest economy rose on the prospect of a nearly trillion euro borrowing boom to fund military and infrastructure spending.

Preliminary talks between Germany's CDU and SPD have yielded an early result, with the parties agreeing on a special fund to boost defense spending, freed from the "debt brake."