There were sighs of relief in European Union capitals when Friedrich Merz was declared the winner of Germany’s February 23 general election. That relief soon grew further when it became clear that his center-right Christian Democrats (CDU/CSU) and the center-left Social Democrats (SPD) had won enough seats to form a coalition. Two weeks later, those sentiments turned into incredulous astonishment when Merz, flanked by his likely coalition partners, announced that he would reform the debt brake and clear the way for massive new borrowing. The hopes that had already been pinned on Merz throughout Europe have since soared immeasurably.
The enthusiasm is particularly great in France, in part presumably because Paris had already expected a CDU chancellor back in 2021 when Armin Laschet ran for the job. Currently under discussion as foreign minister, Laschet is considered a great friend of France. However, the surprising election victory of Olaf Scholz and the SPD back then was quickly recognized as an opportunity: After all, in 2020, when Scholz was Angela Merkel's finance minister in a previous coalition, against the backdrop of the economic fallout of the COVID-19 pandemic, he had made joint EU borrowing possible. Today, this breakthrough is considered Emmanuel Macron’s greatest European policy success. The fact that Scholz believed at the time that a “Hamiltonian moment” had come for the EU fanned hopes in Paris.
It has been well documented that France has been bitterly disappointed by Germany in recent years. Expectations of Merz are now all the higher given that he never missed an opportunity during the election campaign to present himself as the heir to European policy grandees from Konrad Adenauer to Helmut Kohl. In Paris, Merz is striding through historic doors that Macron has thrown wide open since his election victory in 2017. However, after neither Merkel nor Scholz, despite superficially good relations with Macron, agreed to deepen the EU, apart from the one-off post-COVID recovery fund, France’s great hopes now rest on Merz. The fact that the self-confessed transatlanticist also questioned the relationship with the United States in front of an audience of millions on election night made the hearts of French sovereigntists beat all the faster.
Squandered Trust
The enthusiasm for Merz among Germany’s EU neighbors and especially in France is understandable. On European integration, Germany has recently been a brake rather than a driving force. However, in Paris and elsewhere, the immense domestic task that Germany’s next chancellor must tackle is at risk of being forgotten. On election night, Alice Weidel, leader of the far-right Alternative für Deutschland (AfD) and now head of the largest opposition group in parliament, predicted that her party would overtake the CDU/CSU at the next election. Alexander Gauland, her predecessor, had promised in 2017 “to hound” Merkel’s CDU. Weidel now wants to catch up with it under Merz. Whether she succeeds is the decisive question of the decade—also for the EU.
Germany’s European neighbors—whether in Paris or Warsaw—should keep Weidel's words in mind when they welcome Merz into their ranks as chancellor. Abroad, there’s an impression that a new spirit of optimism has recently taken hold in Germany. But here, there are growing doubts. That difference in perception became clear in the Bundestag debate during which the financial packages for investment in infrastructure and climate protection as well as the massive expansion of the scope for defense spending were passed. Merz enthusiastically informed MPs that he had heard from partners during a visit to Brussels that “Germany is back.” However, by that time the honeymoon had evaporated in Germany within just two weeks.
Many voters feel cheated. Under the heading “Our promises for the future,” the CDU's election manifesto states: “We are adhering to the debt brake in the Basic Law. Today’s debts are tomorrow's tax increases.” To be sure, Merz never explicitly ruled out softening the debt brake. However, on the campaign trail he had presented himself as a reformer who wanted to modernize, streamline, and, above all, save. This, he repeatedly said, was his responsibility toward future generations. His decision to do the opposite has cost him a great deal of trust, even deep within his own ranks. In Kühlungsborn at the Baltic Sea, in north-eastern Germany, almost all the members of a local CDU city association left the party in protest saying “red lines” had been crossed. There are also rumblings in the south west, with the CDU in Stuttgart threatening in a resolution: “Chancellor Merz yes, but not for whatever it takes.”
On the Defensive
Merz is aware of the risk he took with his decision on the debt brake. In an interview with Frankfurter Allgemeine Zeitung publisher Berthold Kohler, he admitted that he had “taken on a very large amount of credit, also in terms of my personal credibility.” Several polls—only snapshots, of course—show that the CDU has been losing support since the election. Some put it only one percentage point ahead of the AfD. Many statements by CDU leaders therefore reflect growing nervousness. In mid-March, Secretary General Carsten Linnemann defended Merz' decision in a panel discussion entitled “Good debt, bad debt—has Merz gambled away too much?” and promised structural reforms. Anything else, he said, was “not CDU policy.”
However, the policy turnaround Merz announced in the election campaign and which many CDU voters urgently expect of him seems a long way off. While Merz proposed the name “New Beginnings Coalition”(“Aufbruchkoalition”) as an alternative to the term “grand coalition,” which is usually used for coalitions between the CDU/CSU and the SPD, and Linnemann valiantly repeats in interviews that “a change of policy must be embodied,” the public has recently gained the impression that the CDU is sticking to Angela Merkel’s course of shifting the party toward the center-left by making key concessions to the election losers of the SPD and Greens. If this goes on, fears Wolfgang Bosbach, who has been an important voice in the CDU for years, his party will continue to lose trust.
Another reason why there is much debate about trust in Berlin right now is that the outcomes of all the working groups in the coalition negotiations have been leaked to the media. Journalists, lobbyists, and the interested public are now discussing in real time the points on which the CDU/CSU and SPD parties disagree. Even though the party leaders were at pains to give a different impression in the Willy-Brandt-Haus (the SPD party headquarters) at the start of the negotiations in the steering group: what has been going on since then doesn’t exactly bear the hallmarks of new beginnings and trusting cooperation. Merz spoke of “ever increasing trust.” However, the coalition talks so far beg the question of whether conflict will indeed be settled behind closed doors this time, or whether it will burst into the open as it did in the outgoing “traffic light” coalition of the SPD, Greens, and pro-business Free Democrats (FDP).
Conflicting Expectations
While disappointment looms in Germany, expectations are growing in European capitals regarding the Europeanization of Germany’s fiscal clout. Poland and the Baltic states already spend more on defense than Germany in relative terms. In absolute terms though, they still wouldn’t have enough resources to counter Russian aggression and are therefore hoping for Germany’s economic strength. In southern Europe, in Spain and Portugal for example, the Russian threat is far away. Spain's Prime Minister Pedro Sanchez even criticized the term “rearmament” at the EU summit at the end of March. Nevertheless, Madrid and Lisbon are interested in common EU borrowing. France and Italy, on the other hand, lack the necessary leeway in their national budgets. Because they still want to rearm and help their national industries, they are hoping for support from Berlin or, better still, from Brussels.
Calls for common EU borrowing are also growing in Berlin. In a recently published article for Internationale Politik Quarterly, Shahin Vallée and Joseph de Weck pointed out that a majority of Germans support Merz’ fiscal “whatever it takes” strategy. Referring to figures from a survey by forsa polling institute conducted for the German Council on Foreign Relations (DGAP), the authors called on the German government to go one step further and risk a further “Hamiltonian moment:” They cite the fact that 47 percent of respondents would approve of new joint EU borrowing modelled on the EU’s economic recovery fund (34 percent rejected it, 19 percent were undecided). It was clear that the 2020 recovery fund was a “one-off measure” to respond to an exceptional event. However, the German government must now recognize Europe's security as a common good and back joint funding, the authors argued.
They see the move as a potential part of a larger EU push for integration. In return for renewed German consent to common EU debt, France could extend its nuclear deterrent to European states including Germany that are seeking alternatives to existing US guarantees. The details of this possible integration are still unclear. However, the broad outlines are emerging of the strategic dialog that Merz and Macron have been preparing for months and which is aimed at advancing the EU’s defense policy and fiscal integration.
The Price of Integration
There are good reasons to welcome integration after years of stagnation. However, its advocates in Germany and in European partner states should consider the potential risks and side effects of the move. Above all, they should bear in mind the AfD and its aim of overtaking the CDU/CSU. Analyses of voter migration in the last Bundestag election show that the AfD’s gains in the last parliamentary term initially came mainly at the expense of the CDU.
However, the SPD is also losing ever more voters to the far right: the trend towards people who define themselves as workers, white-collar employees and tradespeople voting for the AfD was illustrated in Gelsenkirchen. In the former SPD bastion, which has the highest poverty rate in Germany, almost a quarter of voters chose the AfD. The party is winning over these parts of society with its criticism of what it claims is unchecked illegal migration and the corresponding displacement effects (such as housing shortages or the overburdening of the healthcare system) that this entails.
The softening of the debt brake and a new European borrowing plan could now appeal to completely different groups of voters. Many households with middle and high incomes would like to see a reduction in taxes and contributions. Like in every election campaign, the “hard-working middle class” and “high achievers in our society” were again courted, particularly by the CDU, but also by the SPD, which put off those voters, however, with the introduction of the so-called citizen’s benefit, which provides higher payments for the unemployed.
Many voters backed Merz in the hope that he would bring about fundamental change in Germany. These voter groups feel less competitive pressure from immigrants and are hence less prone to resentment over immigration. Nevertheless, they are now in danger of becoming “politically homeless,” as Die Welt publisher Ulf Poschardt said in the podcast “Make Economy Great Again,” which he hosts together with the economist Daniel Stelter. Poschardt and Stelter can be regarded as important voices of the middle class. Their disappointment and anger at Merz should therefore give pause for thought.
A look at Germany’s neighbor France in particular shows how the AfD could succeed in overtaking the CDU/CSU. There, the right-wing nationalists of the Rassemblement National (RN) have cemented their core voter base among workers, the self-employed and civil servants in recent elections and are now looking for new voters. The RN too is increasingly trying to penetrate the more liberal spheres of French society which are less receptive to populist slogans on migration and closed borders. In last year's election campaigns, the RN leadership made conspicuous efforts to reach out to these wealthier voters, for example through meetings with the business association MEDEF.
The Spirits We Summoned
The pressure that right-wing populist parties are already exerting in Germany and France has recently been eclipsed by the need to strengthen Europe’s defense capabilities. The Paris Defense and Strategy Forum (PDSF) took place in France in mid-March. A French speaker stressed the historic achievement that Germany is now able to rearm and invest hundreds of billions in defense without alarming its European neighbors.
This view of German investments is correct and is currently shared by all its neighbors. However, it is also very short-sighted, because it fails to recognize that the investments in armed forces and factories that are being decided by politicians today will not bear fruit for at least a decade. But what will French, Polish, and German politics look like in 10 years' time? Anyone who is confident enough to make a final judgment here would be well advised to look back at the events that have changed Europe since 2015.
Merz is therefore facing a crucial decision as Germany’s likely next chancellor: If he blocks the demands of France and other EU member states to clear the way for EU borrowing, he risks restricting the options available to them. Macron in particular could do with a success comparable to 2020 right now. He hasn’t delivered on the promise he made in 2017 to tackle urgently needed reforms—of the pension systems, social security contributions, and the reduction in public spending. Now he lacks national fiscal leeway to underpin the goals of European sovereignty he has set himself. The French, wrote the Financial Times columnist, Simon Kuper, who lives in Paris, are “congratulating themselves on having been right all along on ‘strategic autonomy’.” Now Macron wants to almost double defense spending but is mired in a budget crisis, he added.
Merz won’t be able to solve that quandary, not even at the price of nuclear protection. France should serve as a cautionary tale to German policymakers of the damage that short-term, apparent successes of European integration can cause in the long term. May marks the 20th anniversary of the French “no” to the EU constitution project, which was rejected by a majority in a referendum. The fact that central elements of this project were nevertheless implemented just two years later via the Lisbon Treaty has had a strong impact on the way an entire generation views the EU—on both the left and the right. There are many good reasons to push ahead with EU integration in the face of Russian aggression and American threats. However, it would be a fatal mistake to do this hastily and to take back-room decisions without informing the people and giving them a democratic say.
If Merz opens himself up to new common EU borrowing, he would be breaking his word yet again. “We protect German savers. We clearly reject all forms of German liability for other EU member states’ debt,” reads the CDU election platform. If Merz changes this position, the future chancellor will go all-in. All those who are pushing for this at home and abroad should be aware of the potential consequences.
Jacob Ross is Research Fellow for France and Franco-German relations at the German Council on Foreign Relations (DGAP).
