Germany’s new government: A fragile coalition in a challenging landscape

On 10 June, the ESC hosted a timely seminar with Andreas Busch, who offered a comprehensive analysis of Germany’s new federal government and the broader political shifts shaping the country. Professor Busch—currently an academic visitor at the Centre and Professor of Comparative Politics and Political Economy at the University of Göttingen—drew on his long-standing expertise to assess the government’s early direction and the challenges ahead. The seminar was chaired by Othon Anastasakis, Director of the Centre, with Timothy Garton Ash serving as discussant.

Following the February 2025 general election, Germany’s political landscape has been dramatically reshaped. While the Christian Democrats (CDU/CSU) made modest gains, the far-right Alternative für Deutschland (AfD) surged to over 20% of the vote—an unprecedented rise. The Social Democrats (SPD) suffered their worst result in over a century, the Liberals (FDP) fell below the parliamentary threshold, and the Greens underperformed. Die Linke made a surprise comeback, while Sahra Wagenknecht’s new party narrowly missed entry into parliament. The result was a fragile CDU–SPD coalition led by Chancellor Friedrich Merz.

Professor Busch characterised the coalition as functionally pragmatic but internally fragile. Merz has repositioned the CDU in a more conservative direction, particularly on migration, while also abandoning earlier commitments to strict fiscal rules. The SPD, meanwhile, is undergoing internal consolidation under co-leader Lars Klingbeil, who now also serves as finance minister. Both parties face tensions around strategic direction and long-term viability.

Two pressing domestic challenges featured in Busch’s analysis: migration and economic stagnation. Migration continues to dominate public concern, with a majority of Germans favouring tighter restrictions. However, mainstream parties remain largely clustered on the permissive side of the policy spectrum, leaving political space that the AfD has effectively claimed. At the same time, local authorities report growing strain, as they are increasingly burdened with refugee accommodation and integration responsibilities. The disconnect between political rhetoric and practical implementation has become increasingly apparent.On the economic front, Professor Busch described a stagnant German economy with little growth since before the pandemic. Deep structural vulnerabilities—ranging from export dependence to labour shortages—are compounded by the need for rapid results. The new government’s fiscal stimulus is aimed at boosting investment, particularly ahead of important regional elections in 2026. Yet Busch warned of potential inflationary pressure and highlighted the tension between short-term fixes and the need for long-term structural reform.

Germany’s foreign policy orientation is also in flux. Chancellor Merz has moved quickly to rebuild bilateral ties with key partners, including France, the UK, and the United States, and to assert a renewed leadership role for Germany in Europe. A newly created National Security Council represents an attempt to centralise decision-making, while rising defence spending signals a shift in Germany’s traditional posture. But the return of transatlantic uncertainty, particularly in light of the 2026 US election, raises complex strategic questions.

Responding as discussant, Professor Timothy Garton Ash posed a series of far-reaching questions about the trajectory of German democracy and policy. He examined the electoral sociology of the AfD, particularly its gains in West Germany; the challenges of confronting populism through legal bans; and the wider questions of how Germany might restore economic dynamism, develop a credible defence posture, and navigate competing moral imperatives in crises such as Ukraine and Gaza. He questioned whether borrowing populist rhetoric is politically effective and called instead for institutional and civic strengthening—including in the digital public sphere.

The Q&A session, moderated by Dr Anastasakis, deepened the discussion with audience questions on Germany’s party system, East–West divides, the risks of pro-Russian sentiment, and shifting international perceptions—particularly around Germany’s recent statement on the situation in Gaza.

In closing, Professor Busch pointed to a central paradox: the Merz government holds bold ambitions but operates under significant constraints—economic, institutional, and political. Whether it can stabilise, deliver reforms, and assume a credible leadership role within Europe remains uncertain. Yet, as Busch and Garton Ash both stressed, how Germany responds in this moment will have consequences far beyond its borders.