Letter from Germany: The Merz Delusion

Christopher Jackson

For a man so often described as hard-headed, Friedrich Merz is unusually susceptible to wishful thinking. Now that he is Chancellor — the consummation of a decades-long campaign to return the CDU to the conservatism of its roots — we are beginning to see the difference between what Merz thinks the world is, and what it has in fact become.

In Merz’s imagination, Germany remains a place governed by the tidy certainties of his own youth: industry humming in Westphalian valleys, exports rising, order and hierarchy intact, borders controlled, America reliable. That Germany has long since faded. In its place is a country uncertain of its place in the world, fraying under the weight of an ageing workforce, a sputtering industrial model, and an emboldened far right. In Merz’s rise, one sees not the triumph of a vision but the fear of an abyss.

The world Merz now faces is already defined by its reversals. The United States — under a re-elected Donald Trump — has turned definitively away from free trade. Within weeks of taking office, Trump imposed a fresh suite of tariffs, a flat 10% on all imports and heavier levies on steel, Chinese electronics, and — crucially for Germany — automobiles. For an export-led economy already burdened by inflation and energy volatility, this is a direct threat. In Stuttgart and Wolfsburg, alarm is growing: a 25% tariff on German cars to the US would devastate the sector, which still accounts for over 5% of national GDP and employs nearly a million people. These are not abstract numbers. These are jobs on the line — not just in Germany but across the supply chains that reach into the UK’s Midlands, where precision-engineered components cross borders more often than politicians do.

Merz, with his background at BlackRock and instinctive Atlanticism, once believed Germany could hedge between continents — trading with China, integrating with Europe, and dealing with America as a like-minded ally. But the triangulation no longer holds. China has its own problems, and its EV makers are ruthlessly outpacing their European counterparts. Trump has made it clear that Germany’s trade surpluses are not evidence of virtue but of cheating. The EU, meanwhile, is paralysed — too cautious to counterbalance American hegemony, too fragmented to assert a new economic direction.

And what of Britain, once Germany’s irritating but indispensable sibling in Europe? There, too, Merz finds no comfort. In theory, he ought to be simpatico with the UK’s pro-market instincts. In practice, Brexit has turned the UK into a distant trading partner, and its domestic politics into a cautionary tale. The financial services cooperation promised in the aftermath of Britain’s departure remains thin. Frankfurt — despite post-Brexit ambition — has not dethroned the City of London, and both centres now look nervously towards Wall Street and Singapore. The prospect of a meaningful Anglo-German economic partnership exists only on paper.

At home, Merz governs in the shadow of an increasingly radical opposition. The Alternative für Deutschland (AfD), now labelled “extremist” in parts of the country, continues to rise in the polls, particularly in the former East. Its surge is not only a reaction to immigration, though that remains a defining theme — it is a symptom of economic anxiety, and of a public losing faith in centrist competence. Merz’s instinct has been to accommodate this drift: to speak more bluntly about “economic migrants”, to propose limits on asylum, and to talk up the reassertion of “German interests”. But this strategy is dangerous. It assumes that the AfD can be outflanked without being legitimised. That by echoing parts of their message, one can stem the tide.

Yet this is the paradox of Merz: a man who claims to speak plainly, but cannot see clearly. He talks of jobs, and yet backs deregulation that may sacrifice worker protections. He wants growth, but has little to say about stagnating productivity or digital infrastructure. He worries about competitiveness, but imagines that a lower corporate tax rate alone will animate a continent. He promises a return to fiscal prudence even as the country needs strategic investment — in AI, green tech, and education — more than ever.

For the UK, there will be slivers of opportunity. If a UK Labour government comes to power this year, a new diplomatic tone may thaw some of the chill that has settled over post-Brexit relations. German companies, bruised by volatility in the US and geopolitical tensions with China, may look anew at British partnerships — particularly in renewables, pharmaceuticals, and advanced manufacturing. But these are tactical shifts, not strategic realignments.

In truth, we are watching the flicker of an old order, not the birth of a new one. Merz, for all his fluency, is a man out of time — trying to govern a 2025 Germany with ideas forged in the 1980s. He wants to be the grown-up in the room. But the room has changed. The old maps no longer work. The global consensus is frayed. Trade is no longer frictionless. Immigration is no longer a matter of numbers alone, but of identity and fear. Political centre grounds — once assumed to be durable — now feel hollowed out.

To govern in this world is not just to balance budgets or sign treaties. It is to reimagine what a European economy can look like in an age of division. It is to reckon with decline, and to articulate something beyond it. The tragedy of Friedrich Merz is that, having waited so long for power, he now finds himself with nothing solid to stand on — a manager of the past, dressed for the future, blinking in the light of a world he never quite believed could exist.