German economy holds up in the first quarter, but industry fails Merz government

The country's leading economic institutes criticised the government's agenda, blaming lack of courage. The German Confederation of German Industry is even harsher. In a note circulated yesterday, president Peter Leibinger speaks of a "miserable balance sheet" of the government's first year: "What is missing above all," he says, "is an overall vision for a reform programme". Companies, Leibinger continues, 'are deeply troubled and, if they invest, they do so mainly abroad. Of the announced and urgently needed structural reforms, almost none have been implemented so far. This hesitation represents an existential threat to Germany as an industrial country'.

Companies' expectations are reflected in the labour market: in April, the number of jobless remained above three million, a psychological threshold. "There are no signs of a turnaround and the recovery remains weak," the head of the Employment Agency, Andrea Nahles, said in a note.

The rejection of economists and businesses is echoed by the equally resounding rejection of the polls. The Cdu-Csu, which won the elections in February 2025 with 28.5%, has plummeted to 22-23% in the most recent surveys. The Spd allies have dropped from 16.4% to 12-14%.

In contrast, Alternative für Deutschland, under scrutiny for alleged extreme right-wing drift, is flying and is now firmly the country's leading force, with 27-28% of voting intentions, up from 20.8% in February.

With the elections in two Länder of the former East Germany in September, a political earthquake is looming. In the small Mecklenburg-Vorpommern, Afd gains a third of the preferences in the polls. In Saxony-Anhalt, the party even sees 40%. Such a result, in the distribution of seats, could allow control of the regional parliament and hand the ultra-right the government of a Land, bypassing the firewall (Brandmauer) that has so far excluded it from the halls of power. The shockwave would send Berlin into a tizzy.

On the opposite side of the political spectrum, the Linke now ranks alongside the SPD nationally in some polls and an overtaking no longer seems impossible.

But it is above all the figure of the chancellor that is being questioned, with support plummeting to 15%. The Social Democratic group leader, Matthias Miersch, openly attacked Merz at a party event: 'It is a big problem that he is such an impulsive person. This is not the way to lead the Chancellery'. Miersch echoed the criticism of various economists and accused the government of using the resources of the infrastructure fund (500 billion over 12 years) to cover budget holes instead of making new investments. It is a pity that the number two in the Executive and Finance Minister is the leader of the Spd, Lars Klingbeil. The popular and conservative tabloid Bild thus speaks of doubts about the government's tightness within the Cdu-Csu itself and the possibility of a vote of confidence.

These are all frailties that have accompanied Merz since the day he took office, when he failed at the first attempt and a second vote was necessary, something that never happened in post-war Germany.