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Germany\u2019s once stable and drearily predictable politics are in disarray. At the end of last year, Chancellor Olaf Scholz\u2019s coalition government collapsed, triggering the country\u2019s first early elections in 20 years. Then, in late January, Friedrich Merz, the head of the center-right Christian Democratic Union (CDU) and the leading candidate for chancellor, pushed a hard-line motion tightening Germany\u2019s immigration policies through parliament. To do so, he relied on the support of the far-right Alternative for Germany (AfD), breaking for the first time a federal \u201cfirewall\u201d imposed by Germany\u2019s centrist parties against working with the AfD.<\/p>\n
Merz\u2019s move transformed an already contentious election into the fiercest, most polarizing campaign in recent memory. The stakes for the vote, set for February 23, are extremely high. Debates about immigration, which have been a feature of German politics for a decade, have recently intensified. The economy, among the slowest growing in the\u00a0European Union, faces acute threats from China. A range of tariffs from the United States may be forthcoming, as well. Germany is at the top of U.S. President Donald Trump\u2019s economic hit list, thanks to its major trade surplus with the United States and its cautious defense spending. At the Munich Security Conference, in mid-February, U.S. Vice President JD Vance made clear that German domestic politics are also in the United States\u2019 cross hairs when he implicitly advocated for working with the AfD, which Elon Musk recently called Germany\u2019s \u201clast spark of hope.\u201d<\/p>\n
In the face of these challenges, Germany\u2019s political center is floundering, and longtime observers are concerned that center-right parties might eventually cooperate with the AfD, which is polling in second place. But Germany\u2019s political and economic impasse need not result in a future defined by the far right.\u00a0For decades,\u00a0the country\u2019s politics have been built on\u00a0compromise and consensus by its mainstream parties, including the CDU, its sister party, the Christian Social Union (CSU)\u2014with which it has an alliance\u2014and Scholz\u2019s center-left Social Democratic Party (SPD). Polling suggests these parties may have enough seats to form another \u201cgrand coalition\u201d with each other. In the past, grand coalitions have rightfully been criticized for lacking the ambition and ability to reform, as well as for reducing alternatives at the ballot box, thus indirectly contributing to the AfD\u2019s rise. This time around, however, another grand coalition may be the best option for a stable government that can also reinvigorate the economy as well as Germany\u2019s standing on the international stage.<\/p>\n
A coalition between the CDU\/CSU and the SPD is also what German voters prefer over any other outcome, according to recent polling. This shows that despite recent AfD successes, there remains popular support for centrist policies, including increased spending on defense, infrastructure, and innovation by reforming Germany\u2019s so-called debt brake, a constitutional provision to balance the budget. A centrist coalition could also help bolster EU defenses against Chinese production overcapacity, which hurts German and European manufacturing, and attempt to improve relations with the\u00a0Trump administration. In the end, a Germany aching for stability and reform need not look to new parties but to a familiar and trusted model.<\/p>\n
Shifting ground<\/strong><\/p>\n The premature and chaotic collapse of Scholz\u2019s dysfunctional three-party coalition with the progressive Greens and business-friendly Free Democratic Party (FDP) disappointed many Germans who wanted reform after the stable but stagnant Angela Merkel years. After a promising start, the coalition devolved into a never-ending series of clashes, owing to the parties\u2019 deep ideological divisions, and appeared increasingly incapable of addressing actual policy issues. In the face of steadily worsening electoral results, the FDP departed the coalition a mere day after the U.S. election, thrusting\u00a0Germany\u00a0into deep uncertainty. The hopes for a return to stability now rest on Merz, Merkel\u2019s former CDU colleague and adversary. Merz and the CDU\/CSU lead the polls with around 30 percent of the vote, ahead of the AfD, near 21 percent, and the SPD, at 16 percent.<\/p>\n But Merz\u2019s decision to accept AfD votes on the immigration motion has not done much to help his campaign. Although a majority of Germans favor a tougher stance on migration-related issues, most want to keep the firewall against the AfD intact and do not want to see the far-right party enter government. Merz\u2019s gamble is all the more puzzling because immigration is only one of voters\u2019 many major concerns. As important is economics. Germany still has Europe\u2019s largest economy, but it is in the midst of a sustained downturn. The country\u2019s GDP has all but flatlined since 2019, amid the shocks of the COVID-19 pandemic, increased competition with China, and Russia\u2019s full-scale invasion of Ukraine in 2022, which caused energy prices to spike.<\/p>\n Repairing the resulting damage will be tricky, in large part because the international economic environment has changed significantly since the pandemic. For decades, Germany benefited from a global market in which its exports dominated, giving the country substantial trade surpluses. But now, other countries are eating into its share. Although Germany remained largely unaffected by the first\u00a0China\u00a0shock in the early years of the twenty-first century\u2014when Beijing joined the World Trade Organization and the resulting inflow of cheap Chinese imports gutted certain manufacturing sectors in many countries, including the United States\u2014it is dangerously exposed to the second one. In recent years, Beijing has adopted an aggressive, state-supported export strategy that produces vast overcapacities that threaten Germany\u2019s industrial backbone, particularly its automotive industry and production of machine tools and high-end electronics. As a result,\u00a0these sectors, which rely in part on the Chinese market, have started to contract, and\u00a0exports to China have shrunk, including by 6.4 percent just last year. Cheap competition from China has also put severe pressure on German exporters in third-country markets. Potential Trump administration tariffs on the EU would make it even more difficult for Germany to establish stable economic pathways that don\u2019t involve Beijing.<\/p>\n Merz has also gradually moved the CDU away from Merkel\u2019s China-friendly trade position, recently warning Germany\u2019s biggest companies that they would not be bailed out, as they have been promised in the past, for losing money in the Chinese market.\u00a0He has also called for European coordination on trade with China. His attitude acknowledges the scale of Berlin\u2019s Beijing problem, in contrast to the conflicting positions of Scholz\u2019s three-party coalition, which was torn between the more hawkish Greens and the more trade-focused SPD and FDP. But to remedy it, he will need to overcome opposition from the business-friendly segments of the CDU\/CSU and alter\u00a0a temptation in some western European capitals to keep China close as a hedge against an unfriendly Washington.<\/p>\n Germany\u2019s political and economic impasse need not result in a future defined by the far right.<\/strong><\/cite><\/p>\n Merz also wants to deepen the integration of\u00a0the EU\u2019s single market, including in the defense, energy, and financial sectors, and strengthen European security and defense. Such efforts could include a renewed push to finalize the long-planned Capital Markets Union, which would create a single European market for capital, or efforts to allow joint EU borrowing for defense spending. He has promised to revive the so-called Weimar Triangle, a political cooperation framework between France, Germany, and Poland. Yet he will need to engage with the United States, as well. For the time being, Washington remains Berlin\u2019s indispensable security partner. The United States has also become a crucial energy provider to Germany and Europe. Merz, the former head of the Atlantik-Br\u00fccke, a private nonprofit fostering cooperation between Germany and North America, and a board member at BlackRock Germany, is fundamentally a transatlanticist. He knows the importance of a strong partnership with Washington. But he also acknowledges that under Trump, the United States is \u201cno longer the America we used to know,\u201d as he recently put it.<\/p>\n Merz could help strike deals between the EU and Trump on U.S. tariffs, defense spending, and China. He has some leverage to do so. First, bilateral trade is growing\u2014the United States recently overtook China as Germany\u2019s most important trade partner\u2014and German investment in the United States has more than doubled in the past ten years. Merz could thus make the case that Germany has not only reduced its reliance on China but also created jobs in the United States. He could also offer to further increase the German government\u2019s purchases of U.S. energy and military equipment, in order to offset some of the trade imbalance. Furthermore, as a conservative, he may be well positioned to cooperate with Trump on an interpersonal level. He is, for example, willing to work with Italian Prime Minister Giorgia Meloni, the EU\u2019s so-called Trump whisperer. And like Trump, Merz is a businessman and a critic of Merkel. At a minimum, he has a better chance than Scholz of establishing good relations with the U.S. president.<\/p>\n Merz could also seek to protect Germany from the Trump administration by turning Berlin into an active security provider and negating accusations that it is free-riding on Washington. In a recent foreign policy speech, Merz argued that \u201cGermany has to evolve from a sleeping middle power to a leading middle power.\u201d He has advocated for an overhaul of Germany\u2019s foreign policy, including the establishment of a national security council, and warned about the threat of the \u201caxis of upheaval,\u201d referring to China, Iran, North Korea, and Russia. On Ukraine, he has adopted a tougher stance than Scholz, suggesting that if Putin does not stop attacks on Ukrainian civilian infrastructure, Germany could begin delivering short-range Taurus missiles\u2014which are capable of striking deep into Russian territory\u2014to Kyiv. The U.S. government has signaled that it wants European powers to secure a cease-fire in Ukraine via a European mission; Merz should play a key role in discussions with the United States about the feasibility of such an effort, as well as Germany\u2019s potential contribution.<\/p>\n There will be limits to Merz\u2019s powers when it comes to Washington. A workable relationship between Germany and the\u00a0United States\u00a0is dependent on the Trump administration, and Vance\u2019s recent remarks indicated U.S. interests may extend beyond trade and security and into domestic European politics and the dismantling of regulations. In this case, there may be little room to maneuver. To maintain unity within his fiscally conservative party, Merz has also not yet publicly committed to raising defense spending beyond two percent of GDP (as Trump has demanded) or to fully eliminating the debt brake. But these two positions, at least, are very likely to change.\u00a0A majority of Germans support increasing defense spending and easing the debt brake. Boosting domestic demand through infrastructure and military investments could also help revive and rebalance the German economy and ease its excessive reliance on export-led growth, which has become an increasingly unreliable strategy.<\/p>\n Back to the future<\/strong><\/p>\n Whether Merz can fulfill these ambitions will rest on his ability to both form a stable government and address urgent reforms. His best shot is likely with a renewed grand coalition between the CDU\/CSU and the SPD.\u00a0The German political landscape has become more fragmented with the emergence of far-right and far-left parties that surpass the five-percent threshold to enter the German parliament, but those parties\u2019 foreign policy stances have historically all but prevented their inclusion in ruling coalitions. As a result, the options for forming a stable governing coalition have been reduced, and most Germans prefer the traditional two-party arrangement. (The CDU and CSU are technically separate parties, but nationally they are functionally one.)<\/p>\n Although partnerships between the CDU\/CSU and the SPD have tended to favor stagnation and not reform, public demand and changing conditions should be sufficient to spur them to cooperate on major shifts. The SPD has long supported exceptions to the debt brake, for instance, which may help Merz convince his own fiscally conservative party to follow suit. This is critical, because a constitutional change to\u00a0the debt brake will require centrist parties to organize a two-thirds majority in the Bundestag. (The AfD has signaled it will not vote for any such reform.) The SPD has promoted increased defense spending, too, even if it has backtracked its past positions somewhat during the campaign, in order to regain votes from left-wing parties skeptical of supporting Ukraine.<\/p>\n A grand coalition could also take action to revitalize the German economy, which is still a leader in many industrial sectors, including green tech, and could benefit from the flexibility the country\u2019s relatively low debt levels provide. Loosening the debt brake would free up resources to boost domestic demand through infrastructure and military investments. At the European level, the new German government should push for boosting defensive measures against Chinese overcapacities in order to protect Germany\u2019s manufacturing industry. To diversify the country\u2019s export opportunities, it should also vigorously support EU efforts to open up new markets outside the bloc.<\/p>\n In the absence of a grand coalition with the SPD, the CDU\/CSU could cooperate with the Greens, which is only slightly behind the SPD in the polls, potentially together with the FDP, which is polling just below five percent. This would bring back the kind of three-party coalition that Scholz oversaw. But there is a reason why Germans are not eager to replicate that experiment. The progressive Greens and the CDU represent opposite ends of many important sociocultural issues, which could lead to a repetition of the chaotic infighting of Scholz\u2019s coalition. The FDP, for its part, is opposed to debt-brake reform, a precondition for needed investments.<\/p>\n A grand coalition could also take action to revitalize the German economy.<\/strong><\/cite><\/p>\n If no coalition materializes, the CDU\/CSU could possibly form a minority government on its own. But this would all but ensure instability and an abdication of Germany\u2019s international role. Merz would have to rely on shifting coalitions and could be tempted to find majorities with the AfD, as he did for migration policy.<\/p>\n A minority government might also send Germans back to the polls again, perhaps ushering in a new, unwelcome era of instability for the country. Since\u00a0World War II, early elections have been rare in Germany, and the federal republic remains rightfully wary of parliamentary instability given the experience of the interwar Weimar Republic, the country\u2019s first attempt at democracy. In that period, the parliament\u2019s constant dissolution and reelection paved the way for fascism, and so Germany\u2019s postwar founders placed an emphasis on stability.<\/p>\n Merz and the country\u2019s other centrist leaders should keep this history lesson in mind. Without a stable, centrist government pushing for reforms, Germany will continue its economic slide and embolden the far right. It will become a country that no one\u2014not its politicians, its citizens, or its partners\u2014wants. Merz may have been Merkel\u2019s rival, but to successfully lead the country, he should adopt her commitment to compromise. If he does, he has a chance to turn the corner at home and lead a German comeback abroad. It might be the country\u2019s last opportunity to do so for a long time to come.<\/p>\n<\/p><\/div>\n