In March, optimism surged in European financial markets due to a historic agreement facilitated by Friedrich Merz, Germany’s then-chancellor-elect, which aimed to loosen constitutional spending limitations. This deal was seen as a potential catalyst for alleviating prolonged economic stagnation in the region and addressing geopolitical challenges from the US and China.
However, six months into Mr. Merz’s leadership, concerns have resurfaced, and signs of discontent are emerging. His strategy included significant defense spending and a €500 billion investment in infrastructure and green initiatives. Recently, his economic advisors downgraded Germany’s growth forecast for 2026 to below 1%, coinciding with a decline in business confidence for the first time since April. Critics are questioning whether the lifting of Germany’s “debt brake” can effectively resolve entrenched economic issues, as it may take time for infrastructure improvements to manifest.
Voter patience appears to be diminishing, with nearly half of Europeans feeling their living standards have stagnated or worsened since the 2008 financial crisis. A recent survey indicates that less than 20% of Germans would support Mr. Merz in the next federal election. This disenchantment poses a challenge not only for Mr. Merz and his coalition but also for mainstream political stability, especially as the far-right Alternative für Deutschland party gains traction in polls.
The challenges Germany faces are intensified by global geopolitical shifts, including Russia’s war in Ukraine and competitive pressures from China. Critics are urging Mr. Merz to reconsider social spending to enhance competitiveness. As he grapples with these pressures in his first six months, the implications of economic strategies moving forward remain significant for both Germany and the wider European landscape.
Source: https://www.theguardian.com/commentisfree/2025/nov/17/the-guardian-view-on-germany-under-merz-europes-powerhouse-is-still-struggling