Germany’s new government faces overlapping domestic, international challenges

Incoming Chancellor Friedrich Merz used the outgoing parliament to unlock billions of euros for defense and infrastructure spending, bolstering business sentiment — but US tariffs cast fresh doubt on Germany’s economic trajectory. Merz has tapped some private-sector leaders to head key economic and modernization ministries, leading to some criticism that corporate interests could overtake policy. But an entrepreneurial spirit is welcome after years of “sluggish digitalization, bureaucratic overburden, and growing international competition,” a Handelsblatt journalist wrote. Merz’s government is structured to essentially have 2.5 economics ministries, mainly led by former executives: “Since the full-blooded politicians haven’t performed miracles in the digital world so far, why not try using business methods? It can’t get any worse,” a Süddeutsche Zeitung columnist wrote.

Germany’s establishment parties want to blunt the rise of the Alternative für Deutschland party, which finished second in February’s election. The AfD was designated an “extremist endeavor” by Germany’s domestic intelligence agency on Friday, prompting a rebuke from US leaders. The move reflects a wider debate about how to treat the AfD: Some politicians have called for approaching it as any other party, while others have cautioned against “normalizing” the far right. The German political center controls its destiny, the German Review newsletter argued, and it must govern effectively to keep voters from defecting to the extremes. The AfD’s future has “more to do with something much harder to put a finger upon: [an] imperceptible shift in the stories German society is telling itself.”

Outgoing Chancellor Olaf Scholz, elected in 2021, leaves “lonely and unpopular,” Die Zeit wrote: His coalition fell apart, the far right proliferated while the economy slumped, and his term is seen as a “leaden period” full of missed opportunities. But a review of Scholz’s coalition presents a more mixed picture: Researchers found that more than half of the coalition’s planned projects went ahead, accomplishing more in three years than previous governments achieved in four. For his farewell ceremony on Tuesday, Scholz has requested that Aretha Franklin’s Respect be played: Scholz has “never made a secret of the fact that, in his view, he was not shown enough respect by the public, the media, and even his coalition partners,” Der Spiegel wrote.