German conservatives seal election win, seeking coalition talks

Friedrich Merz, Germany’s conservative opposition leader, has promised swift action to form a new government after winning Sunday’s federal election, though he’ll need coalition partners to govern.

According to estimates from public broadcaster ARD, Merz’s CDU/CSU alliance won 28.8% of the votes. The far-right Alternative for Germany (AfD) came second with 20.2%, while current Chancellor Olaf Scholz’s Social Democrats (SPD) finished third with 16.2% – their worst result since World War II.

The timing of this leadership change is crucial. Germany, Europe’s largest economy, faces several challenges: economic stagnation, the ongoing war in Ukraine, and potential trade conflicts with the US under President Trump that could harm Germany’s already struggling industrial sector. European Union leaders are set to discuss defence concerns next week.

Merz addressed these challenges on Sunday night, saying: “There’s no reasonable alternative to forming a government in Germany in a reasonable and timely manner. The world isn’t waiting for us – Europe is waiting for Germany, that we take a stronger leadership role again.” He aims to form a coalition within two months.

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The euro responded positively to the news, rising 0.3% to $1.0487 in early Asian trading. With the results matching market expectations, investors are now focused on how quickly Merz can establish a government.

To secure a majority in parliament, Merz’s centre-right CDU/CSU will need at least one coalition partner. His most likely path forward involves either partnering with the SPD (though Scholz would likely not have a cabinet position) or working with the Greens. Depending on the final results, he might need both parties in a three-way coalition.

The main points of contention between the CDU and SPD are likely to centre on welfare spending, immigration, and defence funding. If only five parties make it into parliament and current projections hold true, the CDU-led group and the SPD would have enough seats for a majority.

All mainstream parties have refused to work with the AfD, which effectively blocks the anti-immigration party from joining the government.