Friedrich Merz faces a range of political and economic challenges
Friedrich Merz faces a range of political and economic challenges
Yesterday’s Germany election has let created more questions than answers and sparked plenty of national and international uncertainty.
With the Christian Democrats achieving their largest share of the vote, the far-right Alternative for Germany (AfD) surging into second place and Olaf Scholz’ Social Democrat Party (SPD) falling into third, there were no shortage of political earthquakes. The hope is that a coalition government can be formed by Easter – creating a two-month power vacuum even in a best-case scenario.
The biggest loser is certainly the SPD, whose support dropped 9% since Germany’s last election and saw its worst results in decades.
Adding to the complicated picture, on the third anniversary of Russia’s invasion of Ukraine, tensions with the US spilled over, as Chancellor-in-waiting Friedrich Merz warned Europe that the US was now “indifferent” and wondered whether NATO could continue in its current form.
Rachel Rizzo, a non-resident Senior Fellow at the Atlantic Council’s Europe Center, said a second-place finish for the AfD shows that Germany is roughly where the US was about ten years ago: coming to terms with a completely new political reality and dealing with forces that many mainstream political players have tried in vain to subdue.
“At the same time, this is also a big moment for the CDU, which has evolved as a party since the days when it was led by former Chancellor Angela Merkel. The hope is that Merz sees this win as an opportunity to change Germany’s approach to its economy, its defence spending, and its general role as a leader within and beyond Europe,” she said.
Merz vowing to strengthen Germany’s and Europe’s independence vis-à-vis the US might suit a Trump administration if that means a push to strengthen German defence capabilities and a new energy policy that focuses on transition fuels.
“Merz also has experience with the US business world, and could perhaps get off to a fresh start with Washington – if the new US administration doesn’t prematurely make this all too difficult for Merz domestically,” notes Jörn Fleck, Senior Director of the Atlantic Council’s Europe Center.
“Here the tariff threats – to which Germany’s sputtering, export-reliant economy is especially vulnerable – are the main focus. A future Chancellor Merz will also be more outspoken on US tariffs and is perhaps less likely to break EU solidarity on a common European response.”
He said if Merz and the CDU/CSU can form a stable government, quickly and ideally with only one partner, this will be an important injection of stability for the EU from its largest member state.
“Germany has been AWOL as a political and economic leader of the EU, as part of the Franco-German engine, and as a security actor,” he added.
“At a time of tremendous instability, fraying transatlantic links, and fundamental challenges to Europe’s security and economy, Europe simply can no longer afford a Germany missing in action – as both a political heavyweight and an economic engine.”
Germany’s economy hasn’t grown for five years, an extraordinary turn-around for a country whose real gross domestic product (GDP) rose by an average of 1.7% annually between 2010-2019, and remains synonymous with industrial production.
Europe’s largest economy is facing substantial challenges, ranging from the climate transition and demographic shifts to a tense geopolitical landscape with profound implications for trade, supply chains, and security.
Its GDP per hour is about 30% lower than that of leading European nations and the US, and it has lost around 250,000 manufacturing jobs since the start of the pandemic.
Read more: Germany election: energy investment key to growth