Frankfurt, Germany – Friedrich Merz unprecedented Do not win the elections as a German chancellor in the first round To vote in Parliament, although he won in the second, he raised doubts about the ability of his new government to carry out the plans to get the largest economy from Europe out of stagnation.
On Tuesday he stumbled at the beginning of his new coalition government between his union block and the social democrats added uncertainty about the future of an economy that has not seen significant growth since before the Covid-19 pandemic.
Above all, Merz was expected to end the dispute over the expense and the budgets that affected the tripartisan coalition of the predecessor Olaf Scholz that collapsed in November. His February 23. It seemed to guarantee that his government could end policy paralysis and face challenges, including the investment lagging for projects in favor of the projects, the suffocation bureaucracy and the lack of qualified labor.
But the first round flop in Parliament raised questions about how solid the majority of Merz would be and if it can approve reforms to increase growth after two years of production. The outgoing government predicted zero growth for this year.
“The failed vote, and the fact that it came out of nowhere, has already significantly weakened Merz,” said Franziska Palmas, a senior economist from Europe of Capital Economics.
“Your promise to organize a much more efficient and conflict free government … It seems much less credible now. And delivering its economic proposals, including a large increase in defense and infrastructure spending, corporate tax cuts, bureaucracy and digitalization cuts will be more difficult than expected,” Palmas added.
The Merz coalition has 328 members in the new Parliament. The fact that he received only 310 votes in the first secret vote, when he needed the majority of 316 of 630 votes, led to speculation that some fiscally conservative legislators resist their post -election decision to loosen Germany Constitutional limit in deficit spending and establish a fund of 500 billion euros to spend infrastructure, such as bridges, schools and rail lines.
Those measures were passed In the outgoing Parliament.
Merz won the elections with 325 votes in the second attempt, but significant damage has been done. He is assuming the position “with two black eyes and trembling knees,” said Andrea Roemmele, communications and politics professor at the Hertie School in Berlin.
The hope that the government will quickly advance with new investments and reforms “have broken,” said Carsten Brzeski, Macro’s global chief at the ING Bank: “Today’s events show that not everyone seems to have understood the sense of urgency and the need to have a functional government.”
For years, the debt limits the restricted spending in infrastructure and was finally blamed for slowing down growth. In addition to that, China has gone from a lucrative export market for German companies to a competitor in German specialties such as cars and industrial machinery. Extensive permits processes are blamed for decelerating new commercial projects, while the loss of cheap Russian natural gas due to Ukraine invasion has increased energy costs for companies.
While the vote was “a bad surprise”, some of the difficult decisions about spending and the debt limit were already treated in the outgoing Parliament, said Holger Schmieding, head economist of Berenberg Bank. “The additional fiscal space exists … today’s discomfort will probably not affect the way the additional money for defense and infrastructure is assigned significantly.”
Schmieding said that the majority of the votes in Parliament are not by secret vote, which could prevent some of the members of the coalition who rejected Merz voting against bills in Parliament.
The decision to establish the infrastructure fund outside the debt limit had increased the hope of more government expenses and a stagnation exit. These hopes were damping April 2 when the president of the United States Trump announced a lot of new rates In almost all commercial partners of the United States, including a 20% rate on the goods of the European Union.
That was added immediately to the winds against the economy dominated by the export of Germany, amid uncertainty about whether EU officials can negotiate a lower tariff rate during the 90 -day pause institute by Trump before tariffs enter into force.
