Merz’s stumble casts shadow over hopes for rebooting Germany’s struggling economy

FRANKFURT, Germany — Friedrich Merz faced a setback by failing to secure the German chancellorship in the first round of voting, although he ultimately succeeded in the second round. This unexpected turn of events has cast doubt on his new government’s ability to revitalize Europe’s largest economy.

The stumble on Tuesday at the beginning of his coalition government with the Social Democrats has added uncertainty to an economy struggling to regain momentum since the onset of the COVID-19 pandemic.

Merz’s election victory on Feb. 23 was expected to bring an end to the discord over fiscal matters that plagued the previous coalition. However, the parliamentary defeat has raised concerns about the government’s ability to implement reforms and stimulate growth after a period of economic contraction.

The first-round setback has raised questions about the strength of Merz’s majority and the feasibility of passing crucial reforms. The incoming government faces the challenge of jumpstarting growth in an economy that has been stagnant for two years.

The resistance from some conservative lawmakers to Merz’s plans to relax Germany’s deficit spending limit and establish a 500 billion euro infrastructure fund has further complicated the situation.

Despite winning the second round of voting, Merz’s standing has been weakened, and the government’s ability to enact reforms and boost investment has been called into question.

The uncertainty surrounding the government’s economic agenda has dampened hopes for a swift recovery from stagnation, especially in the face of external challenges such as new tariffs imposed by the United States.