Friedrich Merz's Election Setback: Economic Uncertainty Looms Over Germany

Friedrich Merz's surprise defeat in the first vote for the German chancellorship raises concerns about the new government's capacity to address economic stagnation in Europe's largest economy. His February election and coalition agreement initially promised a resolution to prior leadership squabbles but now seem uncertain.

Economists suggest that Merz's coalition with the Union bloc and the Social Democrats might still gain power in later voting rounds. However, the unexpected election outcome already casts doubt on Merz's ability to lead efficiently and deliver on promises like increased investment, tax cuts, and digitalization.

The secret ballot left Merz short of the required votes, with indications of fiscal conservatives opposing his deficit spending plans. Though his infrastructure initiatives passed previously, new tariffs from the U.S. compound the challenges facing Germany's export-heavy economy.

(With inputs from agencies.)