Germany’s stagnant economy tests Merz’s leadership as confidence plummets
Germany’s economy remains stuck in stagnation after two years of decline. With the holiday season approaching, retailers are bracing for weak sales, and consumer confidence has hit levels not seen since the Covid lockdowns. The new government, led by Chancellor Friedrich Merz, is also facing record-low public trust amid ongoing economic struggles.
Friedrich Merz of the CDU became Germany’s chancellor on 6 May 2025, forming a conservative-social democrat coalition with the CSU and SPD. The government took shape after lengthy negotiations that began on 13 March and concluded on 9 April with the signing of the coalition agreement. Yet, despite the new leadership, public confidence in the administration has fallen to historic lows.
The combination of low consumer confidence and weak retail forecasts points to a challenging end of the year for Germany’s economy. With the government’s approval ratings at a low and no immediate signs of recovery, businesses and households alike face continued uncertainty. The slight improvement in the GfK index offers little relief amid broader economic stagnation.
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