Brussels, Jan 23 /Agerpres/ - Germany and France have long been regarded as the twin engines of Europe. While France has to deal with its own slate of problems, in Germany many important issues are on the back burner while the country waits for a new government. Can hard-nosed conservative Friedrich Merz be the fresh pair of hands the country needs?

One month from now on February 23 Germany is electing a new parliament. While the European Union's largest economy is busy with campaigning there is not much bandwidth for pressing European topics. Depending on the outcome of the polls, difficult and drawn-out coalition talks might follow - leading to further paralysis and German distraction from EU affairs.

Clashes between Chancellor Olaf Scholz and his coalition partners over how to get the economy back on its feet were at the heart of the government's collapse in November. It consisted of the Social Democrats (SPD), the Greens and the liberal Free Democrats (FDP).

It's the economy, Olaf
Germany's economy shrank for a second straight year in 2024 according to official German figures, with little hope of a speedy recovery as Europe's traditional powerhouse is also mired in political crisis. Gross domestic product in Europe's largest economy fell 0.2 percent last year, according to preliminary figures from federal statistics agency Destatis, after a 0.3 percent contraction in 2023.

Germany finds itself in the unusual position of being at the tail end in European terms of growth - the European Commission has predicted the overall Eurozone economy to have grown by 0.8 percent in 2024, well above Germany's result.

Germany's structural problems are manifold and affect its economic position in the EU.

Wollmershäuser, head of forecasts at the German economic think tank Ifo, summed up the situation in mid-January, listing the challenges ahead.

Who will rule in Germany?
After February 23, Germany will most likely be ruled by a coalition government again, yet a return of the so-called traffic-light coalition of SPD, FDP and Greens is unlikely. Rebooting the German economy will be one of the main tasks for the new government, which - judging from current polling - could be led by the conservative CDU/CSU party bloc.

In polls conducted five weeks ahead of the elections the picture is pretty clear: The Christian Democratic Union (CDU) and their Bavarian sister party CSU lead the opinion polls of the three main pollsters with a range from 29 to 31 percent, followed by the far-right Alternative for Germany (AfD) with 20 to 21 percent.

Scholz's SPD is only the third-strongest party according to these polls with around 16 to 18 percent, the Greens hold at between 13 and 14 percent. The FDP currently polls around 4 to 5 percent - it may not surpass the 5-percent-threshold to make it into the Bundestag. The leftist party Die Linke (3 to 4 percent) and the new leftist-conservative Bündnis Sahra Wagenknecht (4 to 7 percent) may also not clear that hurdle.

If asked whom they want to be their chancellor, German voters equally prefer the CDU/CSU candidate Friedrich Merz and the Green's Robert Habeck (both at 23 percent) over Scholz (17 percent). The German chancellor is not directly elected.

A coalition between the CDU/CSU and SPD is the most likely scenario. So far, all parties have ruled out forming a government with the AfD.

What is at stake in Germany and Europe?
Whoever takes over in Berlin will have a massive to-do list ahead of them. Apart from fixing the economy and the country's crumbling infrastructure, Germans are clamouring for lower energy costs and the county needs to further reduce its dependence on fossil fuels. One question is whether the new government will subsidise the construction of gas-fuelled power stations, which should serve as back-ups in times when wind and solar energy generation is insufficient.

Prospective chancellor Merz is expected to change course on several key policy topics - environmentalists fear steps backward. Merz for example is sceptical about Germany's energy transition to 'green' steel and his party has already promised to re-introduce fuel subsidies for farmers. But while he recently said he 'regretted' the phase-out of nuclear power, it was probably too late now for a reversal. Merz stressed that he remained committed to Germany's path towards energy transition away from fossil fuels.

What does Merz want?
The conservative party leader regards himself as better placed to enter negotiations with US President Donald Trump than Scholz, who has been more critical of the new US administration - in particular regarding Trump ally Elon Musk's recent interventions in the German election campaign.

Merz's perceived better rapport with Trump could become essential if the US president fulfills his promise of implementing new tariffs. Germany fears it could be on the front line in a new EU-US trade war, which would hit Germany's export-oriented economy hard.

At a meeting of the European People's Party (EPP) in Berlin on January 18 Merz also said that in view of Trump's inauguration the following Monday he added that this event would accelerate 'our efforts to join forces and act together'.

Trump will also expect Germany - and the EU - to position themselves more clearly against China. The new leaders in Berlin will have to figure out how to deal with this and other demands from Washington.

Merz stressed that Germany must take on a leadership role with others in Europe. In his opinion it would be key to pass the Mercosur trade agreement with several South American states, he said on Tuesday.

Also European governments should improve their cooperation in the acquisition of military equipment. 'There are many opportunities for the Europeans, which we do not take advantage of at the moment', Merz added. Getting Germany's armed forces into shape after years of cost-cutting is another task for the new government.

While Scholz's government had been internally split on how much support to give to Ukraine, Merz remains vocal in his support for increased military support for the embattled country.

He accused Scholz of electioneering last week over the latter's refusal to sign off on further arms deliveries to Ukraine worth around 3 billion Euros. Merz - and also Scholz's former coalition partners - believe financing that aid is possible as an 'extraordinary expenditure' without taking on new debt.

Scholz however demands additional borrowing, which would affect the so-called debt brake - Germany's constitutional restrictions on ordinary borrowing. It is now expected that Ukraine will have to wait for a decision until after the February 23 polls.

Merz is also pursuing a harder line on migration. At the EPP-meeting he pointed out that a series of new initiatives by other EU member states existed to improve European rules on migration. 'We need stricter rules to rein in irregular migration to Europe,' he said. Italy and the Netherlands had made great progress on that issue, he added. 'Germany, unfortunately only [makes] smaller steps.'

Apart from the big topics such as migration and defence, other EU members look to Germany for specific aspects of cooperation:

In Sweden for example, the conservative government is hoping for better cooperation on energy issues with Germany. Energy minister Ebba Busch wants Germany to divide the country into electricity price areas, which also would have an effect on the prices in Sweden. At the same time, Busch is very critical towards the German view on nuclear energy.

'It's one thing that Germany doesn't want nuclear energy for themselves, but a different thing when they are stopping others from using funds for it. It's hypocrisy,' Busch fumed in Brussels in December.

In Europe, Sweden is relying heavily on support from Germany when it comes to being frugal. The government and the opposition are united in saying no to any plans for common European borrowing and want to keep the European budget as small as possible. But the pressure is hard on Sweden to follow the change in Finland and Denmark, where other traditionally frugal governments have changed their positions.

The content of this article is based on reporting by AFP, ANSA, dpa, EFE, TT as part of the European Newsroom (enr) project. AGERPRES (editor: Mariana Ionescu)