Coalition dilemmas
Despite leading the center-right Union bloc to victory, Merz faces a difficult task in forming a majority government. His preferred coalition partner, the center-left Social Democrats (SPD), has deep policy differences, particularly on migration, which could hinder negotiations. If SPD cooperation falters, Merz may turn to the Greens, but ideological differences on climate policies and social issues could further complicate talks.
Rising Far-Right influence
The far-right Alternative for Germany (AfD) achieved a historic second-place finish, securing a blocking minority in parliament. While mainstream parties refuse to collaborate with the AfD due to its extremist positions, its growing influence could disrupt key policy decisions, including constitutional reforms and defense spending.
Economic pressures and policy constraints
Germany’s economy is struggling with slow growth and rising competition from China and the US. Merz has expressed interest in reforming the country’s strict debt brake law, which limits government borrowing. However, achieving this will require broad parliamentary support, which may be difficult given the divided legislature. Without reforms, Merz will face challenges in funding infrastructure, defense, and social programs.
Transatlantic relations and foreign policy risks
Merz takes office at a time of geopolitical uncertainty, with tensions involving the US, Russia, and China. He has questioned the reliability of the US as an ally, particularly in light of concerns over a potential Ukraine-Russia peace deal under a Donald Trump presidency. Additionally, his criticism of Washington’s trade policies could strain EU-US relations.
Diplomatic controversies and political risks
Merz’s invitation to Israeli Prime Minister Benjamin Netanyahu, despite an International Criminal Court (ICC) arrest warrant, could lead to diplomatic tensions within the EU and beyond. His previous collaboration with the AfD on a migration-related resolution has also damaged trust with potential coalition partners, particularly the SPD. These political risks could weaken his ability to form and maintain a stable government.
Leadership experience and governance challenges
As Merz lacks prior government experience, his ability to manage coalition politics and navigate complex policy negotiations remains uncertain. His leadership will be tested as he attempts to secure a working majority, implement key reforms, and address domestic and international challenges.
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