What will hinder the work of Germany’s new government and will Merz become Europe’s new leader?
As US President Donald Trump shatters the West’s unity and upends the world economy, Germany must step up quickly to protect its interests and those of Europe.
Fortunately, the incoming coalition government, led by Friedrich Merz, seems up to the task, so long as it demonstrates the resolve to follow through with fundamental reforms.
Not since Konrad Adenauer became the first chancellor of the newly established Federal Republic of Germany in 1949 has a German government taken office under such challenging conditions.
Read more about the challenges facing Germany’s new government in the article by Daniela Schwarzer, member of the Executive Board of the Bertelsmann Stiftung – The worst timing for a new chancellor: what will stand in the way of Friedrich Merz’s government success.
Friedrich Merz’s Christian Democratic Union (CDU) and the Social Democrats (SPD) recently finalized a coalition deal.
Everything is happening in the face of global turbulence caused by US President Donald Trump’s tariff moves, and the far-right Alternative für Deutschland’s first lead in a national opinion poll.
While both parties must still ratify the agreement, Merz will likely be sworn in as chancellor in early May.
The incoming coalition confronts four monumental challenges: a collapsing security environment, aggravated by America’s retreat from global leadership; an economy in decline; an increasingly fragile global order; and rising social and political polarization.
Fortunately, the coalition has the tools to address all these issues. But the CDU and the SPD must demonstrate their resolve to follow through with fundamental reforms, regardless of the short-term political costs.
Merz was able to surmount the biggest obstacle to serious action – Germany’s "debt brake" – before his government was formed.
This was a paradigm shift for a country that has long made fiscal orthodoxy a cornerstone of public policy, and it gives the new government the budget space to increase spending on defense, infrastructure, research, digitalization, and climate protection.
The German constitution can relax its stringent fiscal rules on the size of the federal budget deficit, and adopted a €1 trillion ($1.1 trillion) investment program.
However, higher spending alone will not address the problems stemming from two consecutive years of economic contraction. Reversing this trend will require the government to spend wisely and with a purpose.
Here, the coalition agreement disappoints.
It does not include reforms to cut red tape, encourage private investment, and prepare Germany for an imminent demographic squeeze.
The government also needs to develop a coherent plan for addressing the shortfall in export demand, exacerbated by stronger competition from Chinese products, particularly cars, both in the European Union and in third markets.
Likewise, the new coalition explicitly recognizes the country’s systemic rivalry with China and has pledged to apply a stronger "de-risking" strategy. This, too, will require close coordination with the EU and other global partners.
To that end, the new government seeks to strengthen European strategic sovereignty and help develop a "EuroStack" – a pan-EU digital infrastructure that can rival global players.
Merz’s coalition thus raises hopes for a stronger and more affirmative EU. Demonstrating a willingness to lead in close cooperation with France and Poland, his government has promised greater flexibility in the enlargement process than those that preceded it, and to enhance EU decision-making capabilities by extending qualified majority voting to foreign and security policy.
Equally promising, the coalition agreement underscores Germany’s support for making EU budgetary allocations conditional on the recipient’s adherence to the rule of law – a clear signal to Hungary that Germany will no longer turn a blind eye to its authoritarian tendencies.
But while the next government has expressed a desire to improve EU governance by avoiding the notorious "German vote," whereby the country abstains from voting in EU bodies due to internal disagreement, the suggested mechanism needs to be improved to fulfill this promise. As a result, Merz’s government may not have as much of a voice in Brussels as it would like.
This article originally appeared on Project Syndicate and is republished with permission from the copyright holder.