Friedrich Merz’s government survives but loses authority as European political alignment shifts beneath it
German Chancellor Friedrich Merz marked one year in office in early May 2026 facing a political landscape that has turned sharply against him. His centre-right CDU-CSU alliance and its centre-left SPD coalition partners are locked in sustained disagreements over tax policy, pension reform, and healthcare spending that have eroded public confidence in the government’s competence. With the far-right Alternative for Germany (AfD) now leading in several national polls by as many as five percentage points, and with the SPD trailing both the CDU and the opposition Greens, the coalition that Merz dismissed as indispensable a year ago is showing deep structural strain.
When Merz assumed the chancellorship in May 2025, he did so on the strength of promises to rebuild Germany’s armed forces after years of systematic underinvestment, to overhaul Germany’s pension and tax systems, and to address the country’s chronic infrastructure deficit. Twelve months later, the reform agenda has stalled amid partisan fighting between the CDU and the SPD over the most fundamental questions of fiscal policy. The CDU, rooted in Germany’s business-friendly conservative tradition, has pushed for lower taxes and reduced welfare spending. The SPD, historically the party of Germany’s labour movement, has resisted cuts to pension benefits and social welfare programs that it argues would deepen inequality and damage domestic demand.
The disputes have produced visible legislative paralysis. Pension reforms agreed in principle at the end of last year were quietly shelved after opposition within Merz’s own parliamentary caucus forced a climbdown. Key decisions on the retirement age, contribution rates, and benefit levels have been deferred to a commission whose recommendations are not expected until late 2026 at the earliest. Tax reforms intended to incentivise employment and investment have been delayed for the same reasons. The statutory health insurance system faces funding shortfalls projected to reach tens of billions of euros over the coming decade — a problem that requires political agreement on where the money will come from, an agreement that has not been reached.
Germany returned to growth at the end of 2025, but the recovery is fragile and widely recognized as reversible. The country has endured two consecutive years of recession, and the post-recession rebound is being tested by a convergence of external pressures: an energy shock stemming from the 2026 conflict between the United States, Israel, and Iran, and a new round of American tariffs targeting German automobile manufacturers who were already struggling with intense competition from Chinese electric vehicle producers. Both shocks are hitting Germany’s industrial base at exactly the moment when the coalition’s internal disagreements are preventing a coherent policy response.
Public sentiment reflects the unease. According to a survey published in the business daily Handelsblatt in early May, 73 percent of Germans expressed doubt in Merz’s economic competence — a remarkable collapse for a leader whose principal electoral appeal was his reputation for economic management. Finance Minister Lars Klingbeil of the SPD acknowledged the damage, telling reporters: “The dispute, and particularly the heated debate of recent weeks, has also done us harm as a coalition and as a government.” The mood has been described as palpable by cabinet ministers who have spoken to journalists on condition of anonymity.
The domestic turbulence is particularly consequential because Germany’s European partners are themselves navigating their own political crises. France has been in a state of sustained political fragmentation since its 2026 snap elections produced a hung parliament with no clear governing majority. Spain’s coalition government under Pedro Sánchez faces repeated confidence votes. Italy’s post-election coalition has oscillated between pro-European and Eurosceptic factions on key policy questions. The European Union’s ability to project a coherent geopolitical voice — on the Iran conflict, on the war in Ukraine, on the ongoing trade tensions with Washington — depends substantially on whether Berlin can be a reliable and consistent partner. The current German government’s difficulties make that reliability uncertain.
Germany has pointed to what it considers genuine achievements in other areas. Defence spending has risen sharply since Russia’s 2022 invasion of Ukraine, and the government has presided over a significant reduction in irregular immigration and asylum approvals over the past year. These accomplishments have been largely overshadowed, however, by the domestic political turbulence that has dominated headlines and consumed the attention of senior cabinet ministers.
Merz has repeatedly dismissed speculation that the coalition might collapse and force new elections, asking publicly: “What on earth would come of that?” His argument is essentially defensive — that there is no viable alternative to the current arrangement, and that the country must work through its differences within the existing framework. His critics, both within the opposition and within his own party, argue that this posture amounts to managing decline rather than governing. The AfD’s sustained lead in the polls suggests that a growing share of the German electorate is inclined to agree.
For the European Union, the stakes extend beyond Germany’s borders. Berlin has been a key counterweight to French ambitions for strategic autonomy, a steady supporter of Ukraine’s war effort, and a reliable voice for liberal economic policy within the bloc’s internal deliberations. If Merz’s government continues to be consumed by domestic coalition management, Germany’s ability to play those roles will diminish at precisely the moment when the EU faces its most complex external environment since the 2015 migration crisis. The coalition’s survival into 2027 is no longer in serious doubt. Its authority, however, is eroding week by week, and authority is the currency that matters most in European multilateral diplomacy.