Germany: What Political and Strategic Orientations under Friedrich Merz?

Six months after Friedrich Merz’s arrival at the Chancellery, Germany is going through a phase of political and strategic uncertainty. Between disappointed expectations in terms of economic reforms, a more visible assertion on the European stage, an increasingly ambiguous transatlantic relationship, and the continuity—alongside certain inflections—of German policy towards Israel, Jacques-Pierre Gougeon, Professor of Political Science and Director of Research at IRIS, offers an overview of the current state of Germany’s domestic and foreign policies..

After six months at the head of the Chancellery, what assessment can be made of Friedrich Merz’s domestic policy?

Officially, Friedrich Merz has only been Chancellor of the Federal Republic of Germany since 6 May 2025. It is always difficult to pass judgement after such a short period. Nevertheless, several trends are already emerging. In terms of domestic policy, the initial assessment does not match the expectations of part of his electorate and of the population more broadly. During his campaign, the Chancellor presented himself, on the one hand, as “the reformer” who would enable Germany to relaunch its economy and, on the other, as the leader who would curb the rise of the far right in his country, embodied by Alternative for Germany (AfD).

On the first point, concerns are already being strongly expressed, to the extent that the President of the Federation of German Industries recently issued the following warning: “The German economy is in free fall, and yet the government is not reacting with the necessary determination.” It is true that German industry, which still accounts for 21% of GDP today (compared with 10% in France), is undergoing a crisis that has led the entire sector to lose 120,000 jobs over the past twelve months, including 50,000 in the automotive industry. Major companies such as Thyssen-Krupp and Bosch have been affected. More generally, Germany’s growth rate remains weak: +0.1% in 2025, with a forecast of +0.8%.

Economic circles reproach the Chancellor for not reforming quickly enough—by cutting red tape, reducing the burden of social contributions and, more broadly, labour costs, notably through a reform of the welfare state. Beyond the well-known problems of energy costs, shortages of skilled labour in scientific fields, and insufficient investment in infrastructure, a structural decoupling is looming. Indeed, Germany’s export rate, amounting to 42% of GDP and long considered a strength of its economic model, may become a major vulnerability should protectionist policies return among certain partners. Yet Germany’s two most important trading partners are the United States and China. The former pursues restrictive customs policies, while the latter is flooding the German market with products from sectors that long embodied the pride of “Made in Germany”: automotive manufacturing and machine tools.

The effects of the €500-billion public investment plan (€1 trillion including military investments), launched by Friedrich Merz at the very beginning of his term, have not yet materialised. According to several economists, the first tangible impacts will only become visible from mid-2026 onwards, particularly in terms of domestic demand.

It should be emphasised that, within a grand coalition with the Social Democrats, the Chancellor does not enjoy complete freedom of action. The Social Democratic Party (SPD) seeks to assert its “social profile”, and any reform in the social sphere encounters resistance from the party, which, for example, secured the maintenance of a pension replacement rate of 48% until 2031 and a gradual increase of the minimum wage to €15 per hour. The Chancellor’s CDU succeeded in passing the reform of the citizens’ allowance, but only after intense debate, even though it was provided for in the coalition agreement.

The liberal wing and part of the party’s grassroots consider that reforms are too slow, that tax cuts and support for businesses are being neglected. These internal debates leave part of the electorate with a sense of stagnation—already levelled as a criticism against Friedrich Merz’s predecessor. The far right intends to capitalise on this situation. According to current polling, it indeed appears to be benefiting, overtaking the CDU/CSU and ranking first in the event of federal elections, with 26%, compared to 24% for the CDU/CSU. The Social Democratic Party remains far behind with 15%, followed by the Greens at 12% and the radical left at 11%. Since the last federal election, in which it secured 20.8% of the vote, the far right has continued to rise steadily. Moreover, polls predict that it could reach up to 38% of the vote in the regional elections scheduled for September 2026 in eastern Germany.

What are Germany’s positions in European policy and in its relationship with the United States?

On the European front, Chancellor Merz is undeniably more present than his predecessor. In this regard, he follows the European tradition of his party, the CDU, and of major figures such as Konrad Adenauer and Helmut Kohl, each of whom, in different historical contexts, made a significant contribution to the construction of Europe. Friedrich Merz is also more respected in Brussels than his predecessor.

A form of German leadership is emerging, in particular due to France’s political weakness, still shaken by the consequences of the most recent dissolution of the National Assembly, its very high level of public debt—which continues to worry Germany—and the fact that in 2027 the executive will be renewed amid real uncertainty over the outcome of the presidential elections. All of this creates space for Germany, which is—significantly—the leading economic power in Europe and the third worldwide.

With the largest net contribution to the EU budget (€13 billion, far ahead of France’s €5 billion), Germany also wields substantial financial influence. This matters when it comes to defending its national interests, notably in the European Commission’s retreat on the ban on internal combustion engine vehicles from 2035, and in debates surrounding the Mercosur agreement, but also more broadly, for example on the Ukrainian issue.

On this last point, a shift in the balance of power within the European constellation has become apparent. Whereas France took the initiative at the beginning of the war in Ukraine, Germany has more recently assumed leadership, as illustrated by the meeting on Ukraine held in Berlin on 15 December under the Chancellor’s auspices. Although inconclusive, it nonetheless helped to outline serious lines of discussion. President Trump even chose to intervene by videoconference during the dinner at the Chancellery, despite having previously criticised what he saw as Europeans’ excessive and pointless meetings.

Berlin has also been very active in negotiations concerning the use of Russian assets held in Brussels, expressing its willingness to guarantee up to 25% of a reparations loan drawn from those assets and intended to support Ukraine. Germany’s particular weight on this issue stems from its position as the second-largest bilateral provider of aid to Ukraine after the United States. However, the relationship with Washington remains a decisive factor.

Like all European leaders, Friedrich Merz has been shocked by the way the United States—its president foremost among them—treats Europe. He shares the assessment of his European counterparts and reiterates it readily, as he did on 14 December when he stated: “The pax americana as we knew it is over.” Similarly, upon the publication of the US National Security Strategy, he considered certain sections of the document to be “unacceptable” and declared that if democracy were to be saved in Europe, “Europeans would manage on their own”.

Yet another statement he made on 9 December captures a different aspect of his thinking. Addressing the United States, he remarked: “You need partners in the world, and one of those partners can be Europe; and if you cannot come to terms with Europe, then at least make Germany your partner.” This reflects a form of ambiguity in Germany’s relationship with the United States. On the one hand, there is a genuinely critical stance; on the other, a difficulty in emancipating itself, given the central importance of the transatlantic relationship—not only from a commercial perspective, as the United States is Germany’s leading trading partner, with a trade surplus of €73 billion, but also in terms of political and geostrategic partnership.

More so than his predecessor, Friedrich Merz is marked by the idea that Germany retains a particular role and status, even in the changed circumstances brought about by Donald Trump’s return to power. This, however, is only possible if the transatlantic relationship remains as healthy as possible.

What historical and contemporary analysis can be made of German policy towards Israel?

Unquestionably, Germany’s relationship with Israel is the most delicate and sensitive of all, owing to the Shoah. It is not a diplomatic relationship like any other. In 1952, Chancellor Adenauer signed a reparations agreement with the State of Israel, which contributed to making post-war West Germany “acceptable” again after the horrors it had committed. Shortly thereafter, the Federal Republic also provided military support to Israel, a commitment that has endured and has resulted in 30% of Israel’s imported weapons now originating from Germany, making it the second-largest supplier after the United States.

This relationship with Israel is rooted first and foremost in Germany’s historical responsibility. Former Chancellor Angela Merkel even stated in 2008 that this responsibility formed “part of Germany’s reason of state”. During his visit to Israel on 6 and 7 December 2025, Friedrich Merz reiterated this analysis, declaring that “standing by this country is part of the essential, immutable core of the policy of the Federal Republic of Germany”.

In doing so, he reaffirmed the “fundamentals” of German diplomacy, even though the previous summer he had triggered a crisis between the two countries—and within his own party—by suspending part of Germany’s arms deliveries, owing to his incomprehension of Israel’s military action in Gaza and the high number of civilian casualties. This suspension was lifted in November, but it demonstrated that change is possible.

As regards recognition of the Palestinian state—which the federal government currently refuses to recognise—some Social Democratic members of the governing coalition and certain former senior diplomats are calling for progress on this issue and for recognition to be granted, arguing that the mere proclamation of a “two-state solution” has reached its limits.