Germany’s 2025 Elections: A Shift Back to Conservative Leadership

Germany’s 2025 federal election has marked a significant political shift, with the center-right Christian Democratic Union (CDU) and its Bavarian counterpart, the Christian Social Union (CSU), securing victory. Friedrich Merz is set to become Chancellor, replacing Olaf Scholz. This transition comes at a time of economic slowdown and geopolitical uncertainty, requiring decisive leadership.

CDU-CSU Victory and Coalition Prospects

The CDU-CSU alliance won 28.6% of the vote, signifying a return to conservative leadership. In contrast, Scholz’s Social Democratic Party (SPD) experienced a historic setback, securing only 16.4% of the vote. Scholz acknowledged the outcome as a “bitter defeat.”

With no party achieving an outright majority, coalition negotiations are now underway. Despite its diminished influence, the SPD remains a potential governing partner for the CDU-CSU. Alternatively, Merz may seek an alliance with the Greens. Building a stable coalition will be challenging, as political divisions remain significant.

Surge of AfD and Its Political Implications

One of the most notable outcomes of the election was the strong performance of the far-right Alternative for Germany (AfD), winning 20.8% of the vote. Under the leadership of Beatrix von Storch, the party nearly doubled its support, largely by advocating stricter immigration control and critiquing the previous administration’s economic policies. AfD’s rise has unsettled mainstream parties, and von Storch has portrayed her party as the “only real opposition” should CDU-CSU align with SPD.

Economic Challenges and Policy Priorities

Germany’s economy remains a pressing concern, with weak growth and rising energy costs leading to uncertainty. Leading industrial figures, including Joe Kaeser of Siemens Energy, have described Germany’s economic outlook as a “restructuring case.” Calls for reforms have intensified, with CEOs like Arnd Franz from Mahle urging lower corporate taxes and labor market flexibility.

A significant barrier to major economic intervention is Germany’s debt brake policy, which restricts government borrowing. Financial analysts, including Carsten Brzeski from ING Research, anticipate little change to this fiscal rule under the new government. Without substantial financial leeway, Merz’s administration will face difficulties implementing economic stimulus measures.

Germany and U.S. Relations Under Trump

On the global stage, Germany must reassess its approach to international partnerships, particularly with the United States. With Donald Trump back in the White House, transatlantic ties remain complex. While the CDU’s victory aligns ideologically with Trump’s administration, economic disputes loom. Trump has criticized Germany’s energy and trade policies and may pursue new tariffs on German car exports, posing risks to one of Germany’s essential industries.

Former U.S. ambassador John Emerson suggests that Merz will work to strengthen transatlantic economic relations while simultaneously promoting European self-reliance to limit dependence on Washington. Navigating these challenges will require diplomatic skill and strategic foresight.

Military and Defense Policy Concerns

Germany’s defense strategy will also be a critical issue for the new government. Economic analyst Lars Feld has stressed the importance of securing long-term military funding, as the country’s existing defense fund is set to expire in 2028. However, resistance from the far-right AfD and certain left-wing factions could complicate budget allocations for defense expansion.

Regarding Ukraine, von Storch and AfD strongly oppose continued military aid, arguing that CDU-CSU policies align too closely with the previous administration’s stance. This may create tension in parliamentary debates over Germany’s role in international security efforts.

A New Era of Leadership

As Friedrich Merz prepares to take office, Germany faces a period of transition marked by economic uncertainty, coalition complexities, and evolving foreign policy dynamics. Addressing economic stagnation, securing industrial competitiveness, and managing geopolitical challenges will be among the most pressing tasks for the incoming administration.

With businesses demanding regulatory reforms and international trade relations in flux, the CDU-CSU leadership must act decisively. The next few months will be pivotal in shaping Germany’s economic trajectory, global standing, and domestic political stability. The success of Merz’s government will depend on its ability to balance conservative economic principles with pragmatic governance in an increasingly uncertain world.