Germany is still waiting for Godot

It has been a year since the coalition and the election of Chancellor Friedrich Merz with his promise of a fresh start, but we have yet to see this big reform.

A little over a year ago, after Germany’s three-party coalition collapsed amid fiscal strain and political infighting, Chancellor Friedrich Merz won the election. His main promise was to initiate a much-needed turnaround after years of subpar economic growth and lead a decisive government to tackle Germany’s problems head-on.

Merz portrayed himself as a problem solver who can get things done. However, like his predecessor Olaf Scholz, Merz is hemmed in by pressures at home and abroad. This places him in several dilemmas that are difficult to overcome, testing the current coalition’s ability to govern Germany effectively.

His first dilemma is whether to spend his political capital abroad or at home. Unlike Scholz, Merz is a committed Atlanticist who prioritises foreign affairs. This put Germany back in Europe’s spotlight after improved relations with its neighbouring countries. He has also managed to build some rapport with US President Donald Trump while still occasionally voicing views of his own. This has earned him, perhaps unfairly, the nickname “Außenkanzler” – a chancellor focused primarily on foreign policy – in the German press.

At home, his campaign rhetoric always overstates what German chancellors can do. Power in Berlin depends less on command and more on keeping alliances intact. His skillset in appeasing both junior partners in the coalition, the Christian Social Union (CSU) and the Social Democratic Party (SDP), as well as his own party members is needed to get policy moving.

Key campaign promises

Merz’s political campaign hinged on three headline promises as seen in Graph 1: a tougher approach to welfare reform, a sharp reduction in migration, and lower electricity taxes. All three made it into the coalition agreement with the Christian Democratic Union (CDU), CSU, and SPD. The fate of those pledges is representative of his first year as chancellor.

Let us acknowledge the successes first. Although one of the priorities of the former coalition and especially the SPD was to reform Germany’s social security system and make it more supportive to citizens in need, the current coalition rolled back the criteria to qualify for social safety nets, as the rules implemented in 2023 were much dreaded by the CDU as being unfair to workers and lenient to the unemployed. Of course, the SPD resisted, but Merz got his way in the end – this secured him a symbolic win that was key for his party.

This second part is where things get messy. One issue that Merz has been trying to avoid during the campaign season and is still avoiding is migration. After a deadly knife attack involving pre-school children, Merz demanded stricter border controls, a turnabout from Germany’s open-door policy. The CDU-led interior ministry complied, rejecting undocumented migrants and asylum seekers. While the new policy pleased parts of Merz’s support base, its legal footing remains disputed. This has also strained relations with neighbours, including Poland.

Merz’s last promise, which is a reduction of the electricity tax for everybody, is a broken one. Even before the election, it is obvious that the tight national budget means that the promise will not cover small businesses and households. Much to the dismay of voters and trade representatives, the limited budget has been sustained.

Price of a coalition

Although the coalition has produced some substantial policies, it has also relapsed into the same public bickering voters thought they had just rejected as member-parties try to appease their core constituencies. Difficult reforms on pensions, social security, and the electoral system have been pushed into commissions. In the end, this strategy only delays conflict without much resolution. Note that the success of the Merz coalition depends heavily on how the parties can compromise without watering down reforms.

Looking at political popularity, German voters were far kinder towards former Chancellor Scholz during his first few months in office with a net positive approval rating. In contrast, the public did not accord a long honeymoon period for the Merz government, with approval ratings reversing past the four-month mark, as shown in Graph 2. If this is any indication, Merz will likely have a harder time to push for much-needed reform policies towards enactment.

The much-lauded infrastructure fund is a case in point: as opposition leader, Merz initially argued against loosening Germany’s constitutional debt brake. Yet, within two weeks of winning office and before the new parliament had even constituted, he circumvented himself with the help of the coalition partners he replaced. While this was hailed as pragmatic and right by many, experts have pointed out that the coalition misallocated the additional borrowed funds for investments towards infrastructure.

In the end, Merz may have trapped himself with his own rhetoric. He promised not just competence, but a clean break with the drift of the Scholz years. Though he has delivered some movement – in foreign policy, on welfare, and in tone on migration – these are not the decisive turns he advertised which Germany needs.

The country’s problems are well known. What remains uncertain is whether the current coalition can still summon the discipline to find compromises and address them or if the wait is simply for naught – and until then, we see Germany’s prospects remaining bleak.