German Chancellor Friedrich Merz has tried to shut down speculation over an early election, telling a business audience in Berlin that his coalition with the SPD would not be abandoned.
According to DW, Merz said there was “no situation” in which the coalition would be ended, adding that nobody should have “election dreams.”
That statement matters because Germany’s coalition tension is no longer just a Berlin issue. It is now a test of Europe’s largest economy, its industrial base and its ability to lead the EU through a more dangerous geopolitical cycle.
Germany has stability, but not yet momentum
Merz’s coalition can survive on paper. The harder question is whether it can still govern with enough authority to restore economic confidence.
Germany’s economy grew by 0.3% in the first quarter of 2026, better than expected, but the recovery remains weak. At the same time, unemployment rose above the politically sensitive 3 million mark in April, with no clear sign of a labor-market turnaround. That combination is uncomfortable for any government: growth is positive, but not strong enough to change the public mood.
The government has also cut its 2026 growth forecast to 0.5%, down from a previous estimate of 1.0%. It also lowered the 2027 forecast to 0.9% from 1.3%, while raising inflation expectations as energy costs remain under pressure from the Iran war.
This is the core problem for Merz. He is asking voters, investors and industry leaders to believe in continuity at a time when the numbers point to fragility.
Germany’s industrial model is losing confidence
Germany’s weakness is not only cyclical. Its industrial model is under pressure from expensive energy, weaker export demand and tougher competition from China, especially in sectors such as automobiles, machinery and chemicals.
That makes the political crisis more serious. Berlin is not managing a normal slowdown. It is trying to defend an economic model that no longer delivers the same confidence to voters, companies or EU partners.
For decades, Germany relied on a strong manufacturing base, stable export demand and relatively predictable energy costs. That formula has become harder to sustain. The war-driven energy shock, slower Chinese demand and rising trade friction with the United States have all made Germany’s old growth model less secure.
This is why coalition stability alone is not enough. The government must also prove that it can protect industrial competitiveness while financing higher defense spending, energy transition costs and public investment.
AfD is converting frustration into political force
The political risk is visible in more than one poll. YouGov’s April 2026 Sonntagsfrage put the far-right Alternative for Germany at 27%, ahead of the CDU/CSU at 23%, while the SPD fell to 13%. YouGov said AfD had moved into first place in voter support for the first time since September 2025.
The INSA picture points in the same direction. A recent INSA survey put AfD at a record 28%, ahead of Merz’s CDU/CSU at 24%. The SPD, the junior coalition partner, stood at only 14%.
That matters because AfD is no longer only a protest party on the margins. It is becoming the main vehicle for voters who see Germany’s economic model, migration policy and energy strategy as broken.
The eastern state of Saxony-Anhalt shows how far this shift has moved. An infratest dimap poll put AfD at 41%, far ahead of the CDU at 26% and the SPD at 7%, ahead of a state election in September. If that trend holds, AfD could move closer to leading a regional government for the first time.
For Merz, this changes the cost of a coalition collapse. A snap election would not necessarily renew the political center. It could become a national vote on economic anger.
Germany’s domestic weakness becomes a European problem
Germany’s role in the EU is not symbolic. It is the bloc’s industrial engine, fiscal anchor and one of the main decision-makers on defense, energy security and Ukraine policy.
A distracted Germany weakens Europe’s response capacity. The EU needs Berlin to help manage higher defense spending, energy-market volatility, industrial competition with China and trade pressure from the United States. But a government fighting for survival has less room to lead.
This is where the German coalition debate becomes geostrategic. Europe cannot build a stronger security and industrial policy if its largest economy is politically defensive and economically underpowered.
Merz’s warning against “election dreams” is therefore aimed at more than domestic rivals. It is also a message to markets, EU partners and German industry: Berlin wants to remain governable.
The risk is that governability alone may not be enough. If growth stays weak, unemployment remains elevated and inflation continues to hit households through energy prices, AfD will keep turning economic frustration into political capital.
Merz may keep the coalition alive. But Germany’s problem is no longer only government survival. It is whether the political center can still deliver growth, security and industrial confidence before the far right turns economic weakness into a governing mandate.