When Friedrich Merz tomorrow assumes Germany’s chancellorship at the head of a coalition between his conservative Christian Democratic Union/Christian Social Union (CDU/CSU) alliance with the Social Democrats (SPD), most of his country’s European allies will breathe a sigh of relief. Emerging from economic doldrums and political drift, Germany, they hope, will be back, the signs already there that the vital, once-dynamic Franco-German leadership is being rekindled.
That, at least, is the promise: a reinvigorated economy, flush with a commitment to a trillion-euro infrastructure and defence spend, which will lift all European boats; the largest economic stimulus since the fall of the Berlin Wall; in response to Donald Trump’s prevarication over US Nato obligations, a strong commitment to independent European defence, including solidarity with Ukraine – with arms and a willingness to contemplate Nato membership. And a renewed commitment to European integration.
The German public is perhaps less optimistic about what many see as a lacklustre government led by a party whose election vote of 28.5 per cent was the second worst in its history.
But Merz’s bold first steps are all the more remarkable from this strong Atlanticist and fiscal conservative. In a nod to Trump, without naming him, Merz said last week: “We have come to the realisation that we can no longer be certain of the transatlantic relationship in the spirit of freedom and the rules-based order.”
Look inside: Former RTÉ presenter’s Glenageary home with French countryside-style garden for €2.25m
I decided to buy almost nothing in 2025. Here’s how it is going
Skorts: Why camogie delegates voted to keep them in 2024, and what is different this time around
Can San Francisco’s regeneration plan pave way for Dublin initiative?
Accordingly, he has moved to amend Germany’s constraining constitutional fiscal brake.
In Brussels and other capitals, the hope is that the willingness to loosen domestic curbs on spending and borrowing may also be reflected in a new willingness to do likewise in the EU. On raising European competitiveness, France’s president Emmanuel Macron continues to press Berlin for the joint borrowing recommended by Mario Draghi’s important report, which argues the union needs both public and private investments of €750-800 billion a year, up to 5 per cent of total GDP.
Domestically, Merz promises to maintain a barrier to collaboration at federal level with the far-right Alternative fur Deutschland (AfD) which is now for the first time ahead of the CDU in polls. He was accused of pandering to it on immigration ahead of the elections, promising to tackle “irregular” immigration that had “got out of hand” over the past decade. But he is at odds with the SPD about what to do in practice.
The CDU-SPD coalition agreement also contains few clues, beyond tax cuts and investment incentives, of exactly how the incoming administration will revive the stuttering German economy. The answer to that question will determine the success or failure of the new government.
