Writes Uwe Müller for the Headline Diplomat eMagazine, LUDCI.eu
Editor: Dr Vassilia Orfanou, PhD, Post Doc, COO, LUDCI.eu

Introduction

In May, Friedrich Merz took office as Chancellor, inheriting a country grappling with complex geostrategic dynamics, financial pressures, and volatile inflation. His campaign promises to revitalize the economy, strengthen the middle class, and resolve structural weaknesses fueled hopes for a decisive new beginning. The first 100 days of his leadership were expected to set the tone for a reformist government capable of restoring confidence at home and abroad. Instead, Germany finds itself mired in sluggish growth, rising unemployment, and deepening coalition divisions. What was billed as a fresh start is increasingly seen as a crisis of confidence — raising urgent questions about leadership, credibility, and Germany’s economic trajectory.

First 100 days in power and a crisis of confidence
The first 100 days of a chancellorship are a crucial phase in which the head of government establishes the basis for their entire term. Although these days are not legally binding, they have a decisive effect. Merz’s leadership style is characterized by a pronounced innovative spirit. The proposed solutions are viewed with great confidence in their effectiveness.
The Chancellor’s political influence is also considerable.

Lost Promise

However, the current situation differs significantly from expectations. The economy is currently weak, and public opinion is dissatisfied with the decisions made. Additionally, the coalition government is divided internally. His allies promised economic growth but have not yet delivered. His economic policies have not led to the desired economic upturn. In fact, data from the first three months of his term point to a deterioration in the country’s situation.

In the second quarter of this year, the German economy grew by only 0.1%, and this trend is expected to continue. The industrial sector has also been affected by the crisis. Since June, production has fallen by an additional 1.9%. The highest losses were recorded in mechanical engineering (-5.3%), pharmaceuticals (-11%), and food production (-6.3%). Compared to the previous year, production decreased by 3.6%. This is the lowest level since the start of the pandemic.

The additional impact of the trade agreement signed by the US and the EU in July of this year, which obligates Berlin to invest in and purchase energy from the US economy, is not yet foreseeable. However, even the most optimistic estimates by European experts suggest that the consequences for Germany will amount to at least 0.5% of its GDP. It is reasonable to assume that the German population will bear the brunt of this difficult situation.

Run, Forrest, run!
To rectify the situation, the Merz government’s draft budget for 2026 includes a 174 billion euro increase in revenue through new taxes. The largest budget items will be for defense, including military aid for Israel and Ukraine, as well as infrastructure modernization, particularly in the military sector. Cuts are expected in all other areas.
However, a further increase in national debt could require amending the Basic Law. This would involve a great deal of effort. Is this an appropriate approach?

The decision to establish a “special fund” of 500 billion euros is also ambiguous. The Merz cabinet presents it as an economic stimulus measure, but closer inspection of the initiative reveals that a significant proportion of the funds are earmarked for military spending. Meanwhile, the SPD’s coalition partners are insisting on increasing the proportion of social spending. This could cause the initiative to stall in the Bundesrat and lead to a dispute over priorities within the coalition.

Inflation, which fell to 1.8% in July of this year, could be cited as a success of the Merz cabinet’s economic policy. However, prices are no longer the main obstacle to economic growth. Weak demand for German exports, particularly in the US — which fell by almost 7.7% between May and June of this year — and falling world market prices for oil and energy — which fell by 3-5% — have contributed significantly to the current level of inflation, not only in Germany, but also in the Eurozone as a whole. Therefore, it is inappropriate to attribute this result solely to Merz’s economic bloc.

Nothing new
Citizens are concerned about insufficient economic growth and a lack of jobs. As always, economic problems tend to lead to deterioration in other areas.

According to the Federal Employment Agency, the country’s unemployment rate has reached a concerning level. In July of this year, 2.914 million people were registered in the labor market alone, and the forecast for August is over 3 million. Compared to last year, there has been an increase of 188,000 people. Seasonally adjusted figures also show a further deterioration in the German labor market. Despite campaign promises to create jobs, the Merz government has yet to propose concrete solutions to improve the situation. For a politician who presented himself as a reformer, this is a painful defeat.

Is there a crisis of confidence?
Against this backdrop, polls show a rapid loss of public confidence in Merz’s leadership and growing disappointment with his policies. According to ARD DeutschlandTrend data from July of this year, only 32% of respondents were satisfied with the performance of the current chancellor, a 10% drop from June. Merz is particularly unpopular with women: only 9% of women under 30 consider him their preferred candidate for chancellor. Sixty-five percent of respondents expressed general dissatisfaction with the cabinet’s work as a whole.

The decline in support for the incumbent government is evident across all social groups. The business elite is also showing increasing disillusionment. Surveys show that entrepreneurs are questioning the pace of reforms and Merz’s economic strategy. These results raise the question of whether the cabinet has the necessary skills to address the deteriorating situation in the country and ever-present geopolitical and economic uncertainties, which may stem from allies, such as the United States, under Merz’s leadership.

Chance for the opposition?
Against this backdrop, it is difficult to assess the stability of the chancellor’s position or how vulnerable he is to his political opponents. The opposition already has concrete plans. Political forces on the left, right, and from the Greens are criticizing Merz for failing to deliver the expected results.

The left and the BSW argue that Merz’s government is exacerbating social inequality and undermining the country’s industrial base by focusing too much on defense. The Alternative for Germany (AfD) party highlights the cabinet’s weaknesses and inefficiencies, arguing that it is unable to tackle unemployment, stop the recession, or protect German workers from the effects of the global economic situation.

After the decision to cut subsidies for environmental projects, the Greens accused the chancellor of prioritizing short-term economic gains over Germany’s long-term climate goals.

Internal Turmoil
As is often the case, the most concerning signals are not coming from outside the system, but from within. The coalition, originally formed as a compromise, is showing increasing signs of internal division due to differing approaches to important political issues. The cabinet, which was supposed to represent a broad political consensus, is showing clearer signs of fragmentation.

This division is evident in various areas. Examples include disputes over appointing judges to the Constitutional Court, debates on raising the retirement age to 70, reforms to the social security system, the health insurance funding crisis, approaches to compulsory military service, and criticism of international arms supplies, particularly to Israel and Ukraine. There is also growing public and political dissatisfaction with Merz’s bellicose rhetoric.

Rejection of the chancellor’s policies is reflected in the public manifesto “Securing Peace in Europe Through Defense Capability, Arms Control, and Understanding.” The manifesto revealed deep contradictions within the coalition and expressed concern about the risks posed by the current situation, with the German population, politicians, and experts (including those from the SPD) voicing their worries. The manifesto revealed deep contradictions within the coalition that the current cabinet must address in real time, though not always successfully.

An uncertain pause for the future
Confronted with the urgent need to demonstrate its ability to solve complex domestic and foreign policy problems in the face of greatly increased instability in the world, the Merz government was forced to act. Currently, it is difficult to reliably assess the situation.

Internal conflicts have exacerbated the situation, provoking a split in the coalition and raising questions about the government’s effectiveness. Will it remain in its current composition? Many believe that the biggest challenge is determining what measures Merz and his team will take to achieve strict discipline within the party and overall political stability.

Call to Action & Recommendations

The Merz government has reached a turning point. The first 100 days have revealed the limits of rhetoric; what is now required is delivery. To regain trust, Germany must pivot from fragmented policy-making to a coherent national strategy that restores economic momentum, safeguards social stability, and re-establishes international credibility. This demands more than crisis management — it requires disciplined execution, coalition unity, and a clear signal that the government is willing to prioritize the long-term prosperity of its citizens over short-term political survival.

To achieve this, six immediate steps are recommended:

Rebalance Economic Priorities – Shift resources from defense-heavy budgets toward measures that stimulate domestic growth, strengthen SMEs, and secure Germany’s industrial base as the foundation of resilience.
Restore Coalition Cohesion – Create a structured framework for compromise among coalition partners, preventing paralysis and reinforcing stability at the heart of government.
Launch a Jobs and Innovation Pact – Invest in employment by incentivizing green technologies, digital industries, and modern infrastructure, ensuring Germany remains competitive while advancing sustainability.
Reframe Communication Strategy – Abandon rhetoric-driven crisis narratives. Instead, adopt transparent, data-driven communication that openly acknowledges challenges while presenting credible solutions.
Strengthen European Partnerships – Mitigate the constraints of the US-EU trade deal by deepening economic, industrial, and energy ties within the EU, positioning Germany as a resilient leader in Europe.
Engage Public Confidence – Implement citizen-focused policies in housing, healthcare, and welfare to counter growing inequality and restore confidence in government as a guarantor of security and fairness.

Conclusion

The first 100 days of Chancellor Merz’s tenure were meant to mark a new beginning. Instead, they have exposed the fragility of Germany’s economy, the divisions within its coalition, and a growing crisis of confidence in leadership. Yet, the very scale of these challenges also creates an opportunity: to reset priorities, restore unity, and present a credible path forward.

Germany does not lack the capacity, the resources, or the talent to overcome its difficulties. What it needs is political will, disciplined execution, and a vision that translates into results for citizens and businesses alike. If Chancellor Merz can deliver tangible progress — on jobs, growth, and social stability — he will not only restore confidence but also secure Germany’s position as Europe’s indispensable anchor. Failure to act decisively, however, risks deepening disillusionment at home and weakening influence abroad.

The moment for choice is now: leadership through delivery, or continued drift. The direction Merz sets in the coming months will determine not just his legacy, but Germany’s trajectory for years to come.

Featured Photo by Flavia Jacquier: https://www.pexels.com/photo/red-placard-with-text-4003164/