Friedrich Merz, the future Chancellor following his election victory on Sunday, has big challenges ahead of him. Enormous sums of money need to be raised for the ailing economy, pensions and defence.
The leader of the so-called conservative CDU will be under intense pressure to reduce public spending and change Germany’s debt rules that run deep in the national psyche.
The hyperinflation of Weimar Germany in the 1920s, which wiped out savings and rendered the currency worthless, has been blamed for the rise of Hitler.
In more recent times, German fiscal discipline has been used as a stick against Berlin’s EU allies.
During the eurozone crisis, wealthy German politicians chastised countries such as Greece, Italy and Spain for their irresponsible spending.
This is according to The Telegraph’s Europe editor James Crisp from Berlin.
Berlin insisted on strict EU limits on budget deficits and sovereign debt after playing an influential role in financing and designing the eurozone bailout programmes. But at the same time, a few years later, Germany led Europe into disaster with its open borders and green hysteria. As a result, German industry is struggling, and the German automotive industry in particular is in deep trouble.
The heyday is over
The German economy, the richest in the EU, has been the envy of Europe for decades. But those days are over. In 2024, the economy shrank for the second year in a row, inflation is at its highest in half a century and energy prices are high. Merkel shut down nuclear and coal power and went all in for cheap Russian gas and ‘renewables’. Then Putin invaded Ukraine and the house of cards collapsed in an instant.
Production and exports have fallen, sales to China have declined, and now the Germans could be hit by Donald Trump’s plans to introduce tariffs. Infrastructure and business are in desperate need of modernisation in a country where the fax machine is still in use.
With an ageing and increasingly diverse population, crime is on the rise and incomes are plummeting. Germany lacks people who are willing and able to do a proper job.
With a pyramid scheme-like welfare system, Germany, like the rest of Western Europe, has therefore moved slowly but surely towards economic collapse. The ageing population is threatening the entire economy, immigration is making things worse, and the green hysteria is the nail in the coffin.
At the same time, older voters have a lot of influence, and they are demanding their share. The same goes for millions of so-called New Germans.
A third of all public spending – around £105bn – went on pensions last year. That will almost double by 2050.
It’s a daunting bill to pay, but Germany also needs to start spending big on defence to deter the threat from Russia and satisfy US demands. Donald Trump won’t accept Berlin pleading poverty.
Last year, Germany had a record trade surplus of more than £59bn with the US, which Trump will not accept.
Olaf Scholz, the outgoing chancellor, announced €100bn (£83bn) to re-equip the German army after the invasion of Ukraine. Little has happened, and inflation has taken its toll on the fund. Especially since Scholz shortly afterwards set aside twice as much money for the green shift, known in Germany as Energiewende. A more accurate term might be Energietod. Scholz’s ‘Zeitenwende’ became a pure illusion.
Scholz and the Social Democratic Party (SPD) came third in the election, their worst election result ever in the post-war period. Their defence policy stops at promising and meeting NATO’s minimum defence spending target of 2 percent of GDP. Trump is unlikely to be impressed.
Merz is also unclear and promises nothing about increasing defence investments. Perhaps Merz will have to let Germany be rescued by increased government debt?
But Germany has a debt brake that was introduced as a result of the financial crisis in 2008. This is enshrined in the constitution, and Merz therefore needs two-thirds of the votes in the Bundestag in order to change the law. He is unlikely to achieve this.
Scholz’s efforts to reform the rules led directly to the fall of the dysfunctional coalition, Sunday’s election and his expected departure from power.
Merz has hinted that he may be willing to weaken the brake to enable investment in the economy, but not to pay for social policies.
There have been discussions about joint European loans and joint debt with EU allies to boost defence spending after decades of neglect. But this is unlikely to be well received by Germans, who associate high debt with economic and political instability. They know very well how this ended in the interwar period.
Germany could end up like France.
France, which is Germany’s only rival as the EU’s most influential country, is already burdened by high national debt and breaks European rules on national budgets.
Emmanuel Macron’s attempts to reform the French pension system led to riots and helped create a political crisis that has made him a lame duck president.
Will we see yellow vests on German streets too? This is not the usual German style, but there is a limit, also for the German population.
Particularly upsetting are the constant terrorist attacks and the huge number of knife attacks, rapes and other pleasures resulting from diversity. Public memory is short-lived, but when the crises are almost daily, it’s hard to hold your breath.
Alternative für Deutschland doubled its votes since the last election, but it’s almost unbelievable that so few Germans vote for the party that, according to Elon Musk, is the only one that can save Germany.
The fact that the CDU/CSU parties won the election is unbelievable after all the destruction Angela Merkel has inflicted on Germany. Brussels is shaking in its boots (or skirts) as they risk both France and Germany moving towards a more Eurosceptic stance.
France’s economy has been hit hard, with a national debt of 113.7 per cent of GDP. However, Germany also has a high level of debt, which now stands at 62.4 per cent of GDP. Germany is now experiencing an increase in debt while GDP is falling.
Merz can calculate that the only solution to Germany’s many problems is to bite the bullet, face the political backlash and pull out the national credit card.
But then Germany will be in breach of the EU’s fiscal rules, which it itself has demanded, and risk fines, combined with a certain amount of gloating, from Brussels.
Germany will no longer be a special case, but will become like all other European countries.
The Germans look in horror at France and ask themselves: ‘Will that be us in a few years?’
