Europe is preparing for life after Merz — and bracing for the fallout

Berlin’s paralysis is already rewiring Brussels — even if Merz holds on

The celebrations in Germany over Friedrich Merz’s political troubles are understandable. His party has lost ground to the far right in a string of regional elections. His coalition is quarreling over social care. Domestic opponents are gleeful.

But in Brussels, the mood is far more anxious. Five diplomats and officials told POLITICO that several European governments have held internal sessions to game out what happens if Merz is ousted or sidelined in the coming months. That contingency planning alone is a signal: German leadership is no longer assumed.

Merz may be the weakest chancellor in recent memory, but he is also the EU’s largest economy speaking with one voice — at least when he chooses to. He is the chief negotiator pushing for deep cuts in the bloc’s proposed €2 trillion seven-year budget. He is the leading advocate for saving European heavy industry from competition with America and China. Remove him or weaken him significantly, and two of the most consequential EU debates lose their most assertive champion.

The timing is dangerous. The next multiannual financial framework must be agreed by year-end. France is heading toward a presidential election next year that could install Marine Le Pen, a known euroskeptic. A distracted Germany and a radicalized France would leave the EU’s policy machinery effectively leaderless at precisely the moment it needs direction.

The budget fight gets harder, not softer

Merz’s domestic weakness is likely to make the budget negotiations more intransigent, not less. Two diplomats warned that the chancellor is being pushed to double down on hardline demands for “hundreds of billions” in cuts — a position that leaves little room for compromise precisely because he has so little political capital at home.

Germany, Sweden, Finland, Denmark, Austria and the Netherlands are already coordinating around spending reductions. Poland and Romania are digging in to defend their receipts. Nobody who could replace Merz as chancellor would be more flexible, one diplomat noted — but that is hardly a comfort. It means the budget ceiling could harden into an impasse that drags on for years.

There is a cruel irony here. Merz’s allies argue that his EU stature depends on his domestic standing. Fabian Gramling of the CDU put it plainly: “Strength comes not just from grand appearances in Brussels, but above all from stability, reliability and the ability to push through decisions at home. That is precisely what is lacking at the moment.”

In other words, Merz needs to deliver in Brussels to shore up his position at home — but his need to deliver is making compromise impossible, which weakens his position further. It is a feedback loop that penalizes the entire EU project.

Policy paralysis is the real story

The more immediate damage is not what might happen if Merz falls, but what is happening now while he is weakened. The CDU-SPD coalition has already been undercutting Berlin’s ability to articulate coherent positions on critical files.

Take the combustion engine phaseout. Throughout 2025, German officials were split between center-right ministers who wanted to scrap the green policy and center-left counterparts who wanted to preserve it. Berlin had no position to bring to Brussels. The proposal was ultimately killed at the last minute not by German diplomats but by Merz’s fellow conservatives — Commission President Ursula von der Leyen and European People’s Party chief Manfred Weber — stepping in to fill the vacuum Germany left behind.

The social media ban for children proved no different. Merz publicly backed the idea early in the year, but his government spent more than six months unable to agree on even a basic age limit to lobby for. That is six months of indecision on a flagship von der Leyen proposal, during which time other capitals filled the gap with their own positions.

This is the second-order effect that English-language coverage tends to miss. It is not only about who sits in the Chancellor’s chair. It is about a governing coalition that cannot agree on basic policy directions, leaving Berlin unreliable as a negotiating partner. When your largest partner cannot produce a coherent position, everyone adjusts accordingly — and the adjustment almost always means less German influence, not more.

Industry and the China question

Merz’s push to prioritize European heavy industry over geopolitics at recent summits was another symptom of this dynamic. Germany lost roughly 124,100 industrial jobs last year, according to EY. The government sees deindustrialization as a direct driver of support for both the far-right AfD and the far-left BSW. Other capitals share the concern, but Merz has made it his personal priority.

Yet even within Merz’s own CDU, there is no consensus on what to do. Foreign Minister Katherina Reiche, a fellow party member, is seen as more protective of the relationship with Beijing — and of German industrial giants like Volkswagen and BASF that depend on the Chinese market. That tension between a tough trade posture and economic reality is playing out inside the German government itself, and it is being projected into EU debates over Chinese subsidies and trade practices.

The result is a Germany that raises the alarm about industrial competition but cannot agree on the remedy. For Brussels, that is both a problem and an opportunity. The Commission can fill gaps that Berlin leaves open, but the EU also loses its most powerful advocate for the policies it needs most.

What happens next

The worst-case scenario — a far-right German government — is widely dismissed as unlikely in the short term. None of the mainstream parties want early elections, and the AfD, despite leading the polls at around 28 percent, lacks viable coalition partners. A leaderless Germany or one run by the far right is not the baseline expectation.

More probable is a Merz who stays in office but governs increasingly domestically, forced to prioritize coalition management over EU leadership. Or a Merz who is replaced by a successor from the CDU or SPD — someone who may be more cautious, less driven, and less willing to stake their reputation on contentious EU battles.

Either way, the signal from Brussels is clear: Germany’s ability to anchor EU decision-making is in question. The contingency planning is not about preparing for a specific outcome. It is about preparing for a Germany that cannot be counted on the way it once was.

As Thomas Ossowski, Germany’s ambassador to the EU, told colleagues last week: “Whenever we celebrate German unity, we celebrate European unity. And we need this unity now more than ever.”

The problem is that the unity he is calling for does not yet exist at home — and it is starting to show in Brussels.