Olaf Scholz has lost a vote of confidence in his leadership and Germany now faces its first election of the truly post-Angela Merkel era.
Now Mrs Merkel’s legacy is tarnished, Germany is in recession, and the days when its economy was powered by cheap Russian gas are over.
Old certainties no longer hold true, and neither do old alliances.
Mr Scholz won the 2021 election becoming chancellor after campaigning as a Merkel 2.0 continuity candidate.
At the time, the polls showed that if “Mutti” had decided to run again and extend her 16 years in office, she would have easily won.
Mr Scholz’s Social Democratic Party (SPD) formed a coalition with the Greens and pro-business Free Democrats (FDP) and took power in December 2021, as Mrs Merkel’s Christian Democratic Union (CDU) trooped into opposition for the first time since 2005.
Friedrich Merz, the man expected to be chancellor after February’s election, was chosen as CDU leader at the end of the year. Mr Merz, 69, a conservative and no Merkelian centrist, moved fast to distance himself from a woman who had sidelined him during her dominance of the CDU.
Germany was a seemingly invincible powerhouse, boasting industrial strength, an export-led economy rebounding after the Covid pandemic and a powerful influence in the EU.
Mr Scholz, Mrs Merkel’s former finance minister, looked to be a safe pair of hands.
Its crown as Europe’s biggest economy, held for about half a century despite the costs of reunification, seemed secure.
Then on Feb 24 2022, Russia invaded Ukraine and turned the world upside down.
Mr Scholz, 66, was characteristically slower to react and has struggled to adapt to the new realities facing Germany.
Mrs Merkel, a fluent Russian speaker raised in East Germany, believed in Ostpolitik and Wandel durch Handel (change through trade).
The strategy was that Moscow would behave and become more democratic rather than risk the profits it was making if there were close economic ties with Germany.
In return, Berlin secured access to plentiful amounts of cheap Russian gas, which it used to fuel its world-class manufacturing and export economy.
Mrs Merkel persevered with both policies, despite Vladimir Putin’s annexation of Crimea from Ukraine in 2014, and his willingness to cut off energy supplies to exert leverage.
In fact, she doubled down and backed the opening of a second Nord Stream gas pipeline from Moscow; much to the dismay of many of her EU allies.
Putin’s 2022 invasion of Ukraine ended the era of cheap energy – Mr Scholz branded it a Zeitenwende, a turning point. He broke with the decades of Ostpolitik. In a hugely significant moment for a pacifist country, he announced €100 billion (£83 billion) to overhaul the chronically underfunded and neglected German army.
Germany built expensive new liquefied natural gas terminals and lined up new energy suppliers.
Mr Scholz had warned Putin that Nord Stream 2 would be ditched if he invaded Ukraine. He followed through with his threat. Later, the pipeline would be blown up by saboteurs, suspected to have been sent from Ukraine.
Germany was importing 4,771 million cubic meters of natural gas in January 2022, according to Eurostat. In January 2023, that had dropped to zero.
But that has come at a cost.
Energy prices have reached a new high. In 2024, Germany outranked every other European nation with a price of 0.3951 (€ per kWh).
Experts have said the government waited too long to introduce caps on energy prices in 2022, a period that coincided with a rise in support for the far-Right and pro-Putin Alternative for Germany (AfD).
Nuclear power was not an option after it was ditched by Mrs Merkel after Japan’s Fukushima disaster in 2009. Whether it should be brought back is now a live debate.
Marcel Dirsus, a political scientist, said: “One risk after the election is that the next government will be under pressure to cosy up with Russia once more to bring back cheap energy supplies, which are sorely missed in the east.”
Expectations that the war in Ukraine could soon be over have been spurred by Donald Trump’s victory in the US election last month.
“The second a ceasefire has been agreed in Ukraine, plenty of Germans will want to go ‘back to normal’ with Russia. And it won’t just be extremists. As time goes on, more and more mainstream politicians will call for the same. And this, of course, is exactly what Putin will be hoping for,” Mr Dirsus said.
Britta Jacob, a senior fellow at the Democratic Strategy Initiative, said 72 per cent of the German population supported sanctions against Russia.
“The German government demonstrated that it was possible to get rid of our heavy dependency on Russian oil and gas in no time. A ceasefire is not peace,” she said.
“We shouldn’t reward the aggressive behaviour of an imperialist Russian regime by going ‘back to normal’.”
Last month, it was reported that Stephen Lynch, a formerly Moscow-based businessman, was attempting to buy the Swiss-operated company that controls the Nord Stream 2 gas pipeline and hopes to reactivate it if there is a ceasefire.
“Germany is looking back at another lost year in 2024. The economy has likely contracted for the second year in a row and has not grown in the last five years, the longest bout of weakness in German postwar history,” Deutsche Bank warned recently.
No other G7 economy is experiencing as much stagnation. GDP grew by just 0.1 per cent in the third quarter of 2024 and Germany was in recession from April to September 2024.
A fall in exports, the faltering of the car industry – including unprecedented factory closures at Volkswagen – a lack of skilled workers and soaring energy prices are to blame.
The Bundesbank said that the German economy is “struggling with persistent economic headwinds”. The industrial sector’s exports and investments are under strain.
After five years of stagnation, the economy is now 5 per cent smaller than it could have been if the pre-pandemic growth trends had continued.
Robert Habeck, the outgoing German economy minister, a Green, has said the economy is “dramatically bad” and in “troubled waters”.
According to Bloomberg, which has warned the German economy could be at the “point of no return”, the decline in national competitiveness means every household is worse off by about €2,500 a year.
The cost of living crisis is biting hard, with inflation at its highest for almost 50 years.
The CDU is pledging tax cuts for individuals and companies and wants to raise the threshold for the highest level of income tax.
It hopes to make working overtime more attractive, cut the VAT on dining out, reform the benefits system and abolish a tax once levied to finance the costs of integrating East Germany.
Mr Scholz promises to cut VAT on groceries, increase the national minimum wage to €15 an hour and lower income tax for 95 per cent of earners. All the contenders have proposals to reduce electricity prices.
The contrast with the prosperous past is stark but some things haven’t changed for decades.
Many businesses simply refuse to modernise – the country has been described as an “analogue nation in a digital world”.
German businesses, and even the military, continue to shun email or messenger apps in favour of the fax machine.
Four out of five German companies continue to use the fax machine “frequently, or very frequently”, a study this year found.
The Bundestag, Germany’s parliament, has vowed to phase out the 1990s bit of tech but in the Chancellery, one even more old-fashioned piece of kit is going nowhere: the pneumatic tube machine.
The 18th-century device, which uses air pressure to shoot documents around the building, is being retained as officials say it is far less easy to intercept or hack than emails.
When the Euro 2024 football tournament came to Berlin, most fans expected to be ferried around with ease by a sleek and efficient train network.
In reality, fans were left stranded on platforms as they grappled with long delays, cancellations, and a lack of basic comfort facilities such as air conditioning.
So much for German efficiency.
Trump, trade and China
The collapse of Mr Scholz’s dysfunctional government after he fired his FDP finance minister was met with disbelief by European leaders.
It came on Nov 5, the very day that Donald Trump won the US election.
To make matters worse, France, the other half of the “engine” of EU policymaking, was also engulfed in its own political crisis.
It was not a good time for the EU’s two most influential countries to go missing.
Astonishingly, February’s election would have been held in March at the earliest had Mr Scholz got his way.
Mr Trump’s victory raised questions over Washington’s continued financial and military support for Ukraine and the future security architecture for Europe.
How the EU tries to make up the US shortfall, while punching its geopolitical weight, will dominate the thoughts of the next German government, and governments across Europe.
Germany is Ukraine’s top military supplier in Europe and its biggest after the US, but Mr Scholz’s poor communication skills have seen Berlin painted as a reluctant and ponderous partner.
Mr Merz has put distance between himself and Mr Scholz by taking a more hawkish line on Ukraine than his cautious rival.
The chancellor refuses to send long-range Taurus missiles but Mr Merz is unequivocal about his willingness to give Kyiv the weapons.
‘Peace chancellor’
Mr Scholz is running as the “peace chancellor”, insisting his caution has prevented the war in Ukraine from escalating into a wider conflict with the West.
Boosting the defence industry and re-arming the German army after decades of chronic underinvestment will require a massive psychological shift from the long years of pacifism.
But Mr Trump, who nurtured a dislike of Mrs Merkel, will insist upon it after he returns to the White House in January.
The president-elect believes that German riches were built off the back of a trade surplus with the US, while Berlin freeloaded on Washington’s security guarantees through Nato without investing in its own defence.
Germany’s export economy is particularly vulnerable to Mr Trump’s threats of hitting European imports with 20 per cent tariffs because it exports much more to the US than it imports.
The Economist Intelligence Unit (EIU) has drawn up a Trump Risk Index Unit, which measures the broad exposure of the US’s 70 largest trading partners. Germany has the third-highest risk in the world and the highest in Europe.
Mr Trump will also take a dim view of the close trading links between China and Germany, which is Beijing’s biggest trading partner in Europe.
Berlin has hoped “trade through change” would tame China but that cuts no ice with the new president. Should Mr Trump fulfil his threats of hitting Beijing with 60 per cent tariffs, European businesses will have to brace for their markets to be overwhelmed with displaced Chinese goods.
German industrial production has been sinking slowly for the past four years and its exports have been declining since 2022.
Meanwhile, the German car industry is bruised after being outpaced by Chinese rivals in the electric vehicle sector.
Berlin is on the hunt for new markets, which explains its push behind Ursula von der Leyen’s EU trade deal with the Mercosur bloc of South American countries.
But that deal has bitterly divided EU governments and put Germany on a collision course with France, which has vowed to stop the agreement being ratified.
The rise of the far-Right
The economic slowdown has coincided with a period of unprecedented success for the far-Right AfD, which has led to soul-searching in a country with a Nazi past and even calls for the party to be banned.
The Federal Office for the Protection of the Constitution, the German equivalent of MI5, officially classifies the AfD as a “suspected Right-wing extremist group”.
The AfD is consistently polling in second place – something unimaginable in the era of Ms Merkel, whom Alice Weidel, the party leader, dismisses as a socialist.
But it is extremely unlikely to form the next government because of the Brandmauer or firewall in Germany, where the mainstream parties refuse absolutely to cooperate with the AfD at the national level.
“Only the AfD can save Germany,” Elon Musk, the Trump-supporting tech tycoon, said on social media on Friday.
Mr Musk, whose Tesla car company has a huge “gigafactory” in Germany, shared an activist’s video criticising Mr Merz for refusing to engage with the AfD.
Dr Beatrix von Storch, the far-Right party’s deputy leader, said: “Germany needs the AfD just as the US needs Trump and Argentina needs Milei.”
Speaking to The Telegraph, Dr Von Storch said: “Anyone who previously doubted whether Musk, the richest man in the world, is also the smartest – well, now it’s clear.
“He is at the very least one of the smartest, because he is calling people to vote for the AfD.”
“When it comes to the far-Right, the real risk isn’t this election, but the one after that,” said Mr Dirsus.
“If mainstream political parties are unable to deliver for citizens this time around, there’s the very real possibility that the AfD could become the strongest party in 2029.”
At the local level the Brandmauer is full of cracks – a recent study found 120 cases of parties cooperating with the AfD on local legislation between 2019 and 2023.
There are also some unusual deals being done at Germany’s state level. In the eastern state of Thuringia, the centre-Right CDU party and the centre-Left SPD are forming a so-called “blackberry” coalition with the Left-wing, Putin-friendly BSW faction, led by Sahra Wagenknecht.
The BSW is brand new to German politics, having been founded only in January this year. But it has proven very popular in the former communist east by railing against sanctions on Russia and rising energy prices. If it performs very strongly at the national level it could potentially be a contender to join the next coalition.
Debate on migration
Germany’s debate on migration has to some extent mirrored that of the UK – at the same time as an increase in anger over high levels of immigration, the country is struggling to bring in skilled workers.
Apart from Russia, no other area illustrates the estrangement of German mainstream politics from those of Mrs Merkel so starkly as migration.
She threw open Germany’s borders to more than a million Syrians during the migrant crisis of 2015-16, declaring “Wir schaffen das!” (we can do it).
The grand gesture is credited by her supporters as having saved the EU’s Schengen Zone of passport-free movement.
Under pressure from Mr Merz and the anti-migrant AfD, Mr Scholz has launched a crackdown on illegal migration and announced moves to speed up deportations of failed asylum seekers.
He instituted temporary border controls at all of Germany’s land borders with its fellow EU members.
Such controls are allowed under the Schengen Code, but illustrate how the Willkommenskultur of 2015 is a thing of the past.
After the fall of Bashar al- Assad in Syria, Mr Scholz’s government announced a pause on all asylum claims from Syrian migrants. The foreign office said the dictator’s ousting opened the door to “voluntary, secure and dignified” returns.
On Thursday, Jens Spahn, a CDU parliamentarian, proposed paying each Syrian who self-deports €1,000. The CDU backs a pause on asylum seeker applications from Syria, and in May this year its leader mooted emulating the Tories Rwanda plan before it was ditched by the incoming Labour administration.
After the fall of Assad, Mr Scholz’s government announced a pause on all asylum claims from Syrian migrants. The Foreign Office said the dictator’s ousting opened the door to “voluntary, secure and dignified” returns.
A terrorist attack in the city of Solingen in August was blamed on a migrant and Mr Scholz vowed to speed up deportations. Attitudes could now harden further after a car was driven at people at the Christmas Market in Magdeburg on Friday night. The suspect is a Saudi doctor who has lived in Germany since 2006.
A shift to the Right
Mr Scholz may harbour hopes of an unlikely comeback but his days as chancellor are surely numbered.
Yet Germany’s uncertain future includes the period immediately after the election.
Polls suggest it’s likely that at least two of the CDU, SPD and Greens will end up having to govern together in a coalition.
“Merz would likely be willing to take a tougher line on Putin than Merkel or Scholz ever did. That said, the extent to which he actually can do so will depend in large part on the coalition he forms,” Mr Dirsus said.
He added that the Greens would be more willing to heap pressure on Moscow than the SPD but added: “The world could look very differently by the time a new government is actually formed.”
Both the SPD and CDU are divided over wanting to back Ukraine and its hopes of Nato membership or wanting closer economic cooperation with Moscow.
That means some in the CDU would oppose a coalition with the Greens. A SPD-CDU grand coalition is a possibility.
As for Mr Merz, he expects Germany to become the latest European country to shift to the Right.
“We want to become so strong in this election,” the chancellor-in-waiting said, “we aren’t the ones who have to adapt to others and run after them.”
