Merz Puts Focus on German Economic Policy After Migration Clash

(Bloomberg) -- Friedrich Merz, the conservative frontrunner in the German election, is focusing his campaign on proposals to revive the struggling economy after a bruising clash last week over tougher immigration rules.

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“A CDU/CSU-led government will get to work without any delay and tackle the root of the problems that have paralyzed our country for so long,” Merz said in welcome remarks at the party convention of his Christian Democrats in Berlin. “We will ensure that the people and companies in this strong, wonderful country go into the 2025 summer break with renewed confidence.”

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Less than three weeks before the federal election on Feb. 23, his party is meeting on Monday to provide an update on the campaign and rally his supporters. Merz provoked outrage from political opponents last week when he accepted votes from the far-right Alternative for Germany party, or AfD, for a draft law on tightening immigration rules, which in the end didn’t get passed by parliament on Friday.

Given Germany’s persistent economic malaise an attempt by Merz to pivot back on efforts to revive Europe’s largest economy might fall on fertile ground. Data last week showed a bigger contraction than initially estimated in the final quarter of 2024, while unemployment jumped to the highest level in more than four years in January.

Numbers this week might be similarly painful, with industrial production for December — due Friday — expected to show a contraction. That day will also see the publication of 2024 trade figures, a particularly sensitive data point at a time when US President Donald Trump is making good on tariff threats against allies.

On Sunday, Merz was keen to stress yet again that the failed attempt to pass legislation helped by votes from the AfD was not an overture to closer ties. He once again ruled out any cooperation between a possible government led by him and right-wing lawmakers in parliament.

“We will not cooperate with the AfD,” Merz said. “We have never cooperated with them, we will not cooperate with them. And there is no need for anyone to worry that this will take place. It does not happen with us, with me.”

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Still, the Social Democrats and the Greens doubled down on slamming Merz in recent days for breaking what they see as a taboo in German politics. At an SPD election campaign event in Hamburg on Saturday German chancellor Olaf Scholz questioned whether Merz’s promises not to cooperate with the AfD could be taken seriously. “This is a catastrophe for the CDU/CSU,” Scholz said.

The clash in parliament also triggered protests in several German cities over the weekend. More than 160,000 people demonstrated in Berlin alone on Sunday against the conservatives’ controversial vote in parliament, according to local police. The protesters marched from parliament to the CDU’s headquarters. Still, on Monday only about 500 protests were at the CDU’s convention site.

What Bloomberg Economics Says...

“Economic concerns and migration are among the top issues in the minds of voters ahead of the upcoming German elections, which provides the AfD with opportunities to capitalize on those issues and increase its share of the vote.”

—Martin Ademmer, Antonio Barroso and Jamie Rush. For full research, click here

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Merz — who is set to deliver a keynote speech later at the convention — will also need to address rumblings within his own party. His push to accept the AfD’s support triggered a rebuke from former Chancellor Angela Merkel, who had been one of Merz’s main opponents within the CDU for many years.

She published an open letter last Thursday saying it was “wrong” that Merz didn’t stick by an earlier proposal that had ruled out any parliamentary majority that required the backing of the AfD. In the final vote on Friday, twelve lawmakers in the conservative bloc of 196 lawmakers broke rank and didn’t cast a vote — the same number needed to pass the bill.

However, Merz will seek to present a unified front on Monday in Berlin and CDU politicians will be careful to risk open opposition to Merz during the final stage of the election campaign.

What remains to be seen is whether Merz’s misstep affects the CDU’s lead in the polls. An Insa poll for Bild am Sonntag newspaper — conducted on Thursday and Friday — showed support for the conservative bloc at 30%, unchanged from the previous week, and the AfD at 22% in second place, up one point. The SPD also gained one point to 17% and the Greens were stable at 12%.

--With assistance from Michael Nienaber.

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(Updates with Merz comments starting in second paragraph)

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