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Announced on 24 February 2025, Friedrich Merz’s conservative CDU-CSU party have won Germany’s election.
The largest democracy in Europe went to the ballot yesterday. After Olaf Scholz’s three-party coalition collapsed, the last few months of German politics were disrupted by internal disputes. The public sought stability and for Germany to once again emerge as an international player and saw this election as an opportunity to achieve that end—hence the 83% turnout, the largest since reunification in 1990.
With a 28.6% majority, just shy of the 30% he expected, Merz is now concerned with forming a coalition with Scholz’s centre-left SPD party. Despite winning only 16.4% of the vote – their worst-ever showing – the SPDs are more aligned with Merz’s ambitions than the far-right AfD, who attracted the second-most votes.
Merz’s top priority is now creating strong a intraregional network within Europe so that “step by step, we can really achieve independence from the US.”
To make Germany a more attractive business environment, Merz advocates reducing corporate tax rates from the current approximate 30% to around 25%. This would allow the country to remain robust in the face of US competition, make it a more appealing investment environment, and better address non-wage labour costs. Around 42.3% of gross wages in Germany go towards medical, social, and unemployment insurance: the country’s non-wage labour costs are now at their highest level ever.
In February this year, Merz proposed renewing efforts towards an EU-US free trade agreement. Evidently, the US’ strong and isolationist rhetoric has caused Merz to change his stance since.
In 2024, the US surpassed China to become Germany’s largest single trading partner, a position China had held since 2015. Germany holds a record trade surplus of €70 billion, thanks largely to Germany’s exports to the US, particularly in automobiles and pharmaceuticals, which grew by 2.2% to €161.3 billion.
As such, the Bundesbank has warned that US tariffs could hinder Germany’s economic growth, which has already seen contractions over the past two years due to factors like increased Chinese competition and rising energy costs. Bundesbank predictions put Germany’s economic growth at 0.2% this year and 0.8% in 2026, and tariffs could bring an additional 1.5 percentage point reduction over the next three years.
The message of intra-European resilience has been somewhat undermined by the apparent relationship between the AfD and the US. Alice Weidel, leader of the AfD, said that she had received “calls and messages from the USA, including from Elon Musk with personal congratulations.”
On the other hand, Merz took a stronger stance against Donald Trump’s administration during a post-election debate on Sunday: “I would never have thought that I would have to say something like this in a TV show but, after Donald Trump’s remarks last week… it is clear that this government does not care much about the fate of Europe,” he said.
The contrast in US approaches between Germany’s two leading parties could portend a more complicated path towards a coalition government for Merz than he initially anticipated.
Nonetheless, between 2003 and 2008, Germany was the world’s largest exporter. It was also a founding member of the EU, the G8, and the G20. In global trade networks, Germany held significant influence and now holds potential; Merz’s strategy of putting blinders on to ensure the US doesn’t attract undue attention appears to be a sensible approach for realising that potential once again.
