Germany

"Germany is back on track," but the new government faces a huge challenge.

The new Chancellor, Merz, is tasked with reviving the economy, strengthening Berlin's role in the world, and combating the rise of the far right.

The new German government faces the challenge of turning the economy around.
Beatriz Juez
12/04/2025
3 min

Berlin"Is this a love match?" asked Bavarian Prime Minister Markus Söder on Wednesday in Berlin during the presentation of the coalition agreement between the Conservatives and Social Democrats to govern Germany for the next four years. Söder, who also leads the Bavarian conservative Christian Social Union (CSU), immediately shrugged, his gaze shifting to Friedrich Merz, leader of the Christian Democratic Union (CDU) and future chancellor of Germany, and Lars Klingbeil, chairman of the Social Democratic Party (SPD).

"Love passes, but the hectare remains," Söder predicted, evoking a saying from the German agricultural world that provoked a burst of laughter from those present. Even Merz and Klingbeil smiled at the Bavarian's quip.

Whether Germany's new coalition government is a marriage of love or convenience, Merz, who is expected to be sworn in as chancellor in early May, will have a huge task ahead of him: pull Germany out of recession and the industrial crisis, fight the rise of the far right, reduce illegal immigration, increase defense spending and confront external intimidation: the trade war started by Donald Trump and the Russian threat of Vladimir Putin.

The coalition begins its journey with Europe's largest economy stagnating after Two years of recession and with key industries severely affected by Chinese competition, like that of the car, delayed in the race for the electric car. Despite the 90-day pause announced this Thursday by US President Donald TrumpGermans fear the impact tariffs will have on exports, which are the engine of the German economy.

Debt flexibility

Before the announcement of the coalition with the Social Democrats, Merz had succeeded in getting the German Parliament to approve constitutional changes to relax the debt brake., anchored in the Basic Law, the German Constitution. The reform was adopted against what Merz had promised during the election campaign.

The coalition, known as the Black-Red coalition due to the colors of its constituent parties, will have unprecedented room for maneuver to implement the rearmament plan, revive the ailing German economy, and implement a multi-billion-dollar infrastructure investment package. Thanks to the constitutional reform, in the future, defense spending and certain areas of security policy that exceed 1% of GDP will not be taken into account under the Basic Law's debt rule. In this way, Merz breaks the taboo of austerity, the sacred rule that had governed Berlin since former conservative Chancellor Angela Merkel.

Merz defends European strategic autonomy and is in favor of sending Taurus long-range missiles to Ukraine. Before becoming chancellor, The German leader proclaimed Germany's security independence from the United States. Faced with the uncertainty surrounding Washington's military support since Trump's arrival at the White House, Merz has also expressed openness to expanding France's nuclear umbrella.

"Friedrich Merz has laid the groundwork for him to emerge as a strong figure in foreign and security policy," says Jana Puglierin, director of the Berlin office of the think tank European ECFR. "With plans for a National Security Council and a central situation room in the chancellery, the consolidation of strategic decision-making, a trend that has been brewing for some time, continues," says this German political scientist.

Merz also wanted to place a member of her party in charge of the Foreign Ministry, who will be from the CDU and not the Social Democrats. It is most likely that the new German foreign minister "will act more as an executor of the chancellery's strategic vision than as an independent actor setting controversial priorities," says Puglierin.

The alliance with France

Merz's arrival at the chancellery could restart the Franco-German engine of the European Union, which has been at a standstill for some time. French President Emmanuel Macron may finally find in Merz the accomplice he needs for a Europe worthy of his ambitions, something he failed to find in the outgoing chancellor, Olaf Scholz, who sometimes struggled to make decisions.

However, Merz is not only looking to Paris, but also to Warsaw and London. Germany seeks to engage more deeply with Poland than it has in recent years, showing more respect and attention to German-Polish relations, without forgetting the United Kingdom, which continues to have a significant impact despite Brexit.

Merz has asserted that "Germany is back on track" thanks to the coalition agreement with the Social DemocratsWhether the coalition is a love match or not, Merz will need his Social Democratic partners to pull Germany out of its current economic slump and flex his muscles in Europe and around the world.

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