A year and a few days ago, on November 6, it collapsed due to internal dissent. the tripartite between social democrats, greens and liberals of Olaf Scholz. The collapse of what, at the time, the right-wing opposition called a “failed coalition” was followed by early elections and the rise to power, on May 6, of the conservative leader Friedrich Merz. His workhorse was the commitment to reactivate the economy of the leading power in the EU, after two years in recession, and the achievement of global political leadership for Germany. He synthesized both challenges into a motto in English: “Germany is back.”
Six months after entering the Foreign Ministry, his coalition between conservatives and social democrats suffers under harassment from the far-right Alternative for Germany (AfD). The first position in the polls alternates, week by week, between the ultra and the right-wing formation of Merz. The chancellor’s recipe to confront them goes from a heavy hand on immigration to the search for remedies for Germany’s two economic pillars, the automotive industry and steel. Other more pressing problems for citizens, such as housing, are waiting in the wings. Disagreements between the coalition are on the agenda both economically and politically.
A GDP that does not go back
The term “failed coalition” with which Merz attacked the social democrat Scholz now affects his government. Germany opened 2025 with a GDP rebound of 0.3%, only to drop to a contraction of 0.2% in the following quarter. The third quarter has ended with stagnation and forecasts of minimal growth at the end of the year. The faces of the bad economic news are those of the vice chancellor and head of Finance, Social Democratic leader Lars Klingbeiland the Minister of Economy, the conservadora Katherina Reiche, coming from the business field. The first is blamed for lack of experience in a key department for a country with 83 million inhabitants. To Reiche, who intends to apply social cuts that his partners cannot accept in a Germany whose social fabric is already very precarious.
The grip of tariffs
Merz came to power as a former internal rival of Angela Merkel, with a more centrist line, and in a country whose hallmarks of export power, automotive and steel, were in crisis. He was identified as a “friendly” leader of big industry. But Donald Trump’s passion for tariffs and lack of response to cheaper competition from China hamper its relaunch. He began his mandate under the sign of business support, embodied in an alliance with 60 leading companies and a investment plan of 630,000 million euros in three years. From there he has gone on to call successive summits for the automotive or steel sectors, which close with promises of relief in the energy bill in the sectors that consume the most. But global solutions, such as free trade agreement between the EU and Mercosur, They do not depend on Berlin, but on Paris or Brussels. Thus, one in three companies plans to cut staff in 2026, according to the German Institute of Economics (IW).
From precariousness to poverty
Access to housing is another global problem, recognized as such by the EU, but for many Germans, especially in Berlin, it was unknown for decades. House prices will skyrocket and experience record increases in 2027 for both owned apartments or single-family homes and rentals, according to forecasts from the World Economic Institute (IfW). It is estimated that six million households are strongly stressed by the price of their home. Almost thirteen million fear, in the short or medium term, that they will not be able to meet these costs. Precariousness has also reached a segment of the population that was considered untouchable, such as retirees. One in four pensioners is still actively working, either by personal decision or because their retirement is not enough. Merz has activated an active retirement formula that will allow those who work as employees to collect up to 2,000 euros per month exempt from additional taxes.
Success is measured in deportations
Merz presents as a success the decline in asylum requests to Germany, which is no longer the first destination for immigration to Europe. In the first half of the year, 86,000 applications were received, 50% less year-on-year. The number of refugees remains high, 3.3 million, not counting the million and a half Ukrainians who arrived after the Russian invasion. Deportations of rejected asylum seekers with serious crimes increased. Until September they stood at 17,800, compared to 20,000 in all of 2024. The architect of these “successes” is the Minister of the Interior, Alexander Dobrindtof the Bavarian Christian Social Union (CSU). The Foreign Minister has been placed on a tightrope, Johann Wadephul, for questioning whether Syria is already a safe country. Almost a million Syrians live in Germany, most of them having been in the country for more than seven years. Barely 4,000 have voluntarily returned to their country after the fall of Bashar al Assad. The group of those potentially expellable is 10,700, of which 980 are waiting for their expulsion to be carried out. The fact that Wadephul questioned the effectiveness of these orders unleashed an avalanche of criticism of the minister, the first foreign minister from Merz’s party since the 1960s.
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