Merz lashes out at Trump and Brussels as Germany’s economy falters

Key Points:

• Chancellor Friedrich Merz’s conservative-led government has failed to revive Germany’s stagnant economy one year after his election, with Merz increasingly blaming external factors such as the Iran war, U.S. policy, and EU regulations.
• Merz criticized the U.S. handling of the Iran conflict for causing economic harm to Germany through rising energy prices, provoking a sharp rebuke from former President Donald Trump.
• The chancellor is also targeting Brussels, pushing to reduce EU regulations, especially on industrial AI and public spending, to appease German business leaders who see EU bureaucracy as a competitiveness drag.
• Merz’s popularity has hit new lows amid economic dissatisfaction, with the far-right AfD party rising in polls as the most popular political force, reflecting public frustration over the government’s lack of effective economic measures.
• Domestic options for stimulating growth are limited, with recent government borrowing redirected to budget gaps and defense spending less effective economically; planned structural reforms on health care, taxes, and pensions face coalition disagreements and parliamentary hurdles.