When Friedrich Merz became Germany’s chancellor this year, he promised to revive a moribund economy, rebuild the nation’s neglected infrastructure and make the country relevant on the global stage again.

His failure to deliver on many of these core issues has not only helped energize far-right parties like the Alternative for Germany, it’s also stoked speculation that Merz’s government may suffer the same fate as that of his predecessor, Olaf Scholz, and collapse before it completes its term.

Only 16% of Germans want to see Merz, who has just turned 70, as a candidate in the next federal election, according to a recent poll by RTL/n-tv, and his two-party coalition is paralyzed by internal conflicts and rivalries. German stocks, which surged as he took office, have been going sideways since the summer.

“There are people in his caucus who are questioning all of the chancellor’s talk and asking themselves, where are the results?” says Sudha David-Wilp, a senior fellow at the German Marshall Fund in Berlin. “But the outlook is grim.”

On Saturday, the chancellor faced an open rebellion of his party’s youth wing against a planned pensions reform currently making its way through parliament.

“This pension package, with its additional costs of €120 billion ($139 billion) beyond what was agreed in the coalition agreement, must not be allowed to happen under any circumstances,” said Johannes Winkel, leader of the conservative youth organization Junge Union, at a conference in the town of Rust in Germany’s southwest.

Merz, who also attended the event, said he shared some of the young conservatives’ concerns, but still defended the bill. As CDU party leader and chancellor, he also needs to keep the interests of the older generation in mind, Merz said. “I have to ensure that we remain structurally capable of winning a majority in the Federal Republic of Germany,” he told the delegates in a heated debate. “It is the task of a Federal Chancellor to balance the interests.”

It’s a risky bet for the German leader. Eighteen young conservative lawmakers have already announced that they’ll block the law proposal in parliament, where the government only has a 12-vote majority. Failure would risk the Social Democrats quitting the coalition, potentially leading to Merz’s government imploding.

Social Democrat head Lars Klingbeil, Merz’s finance minister and deputy chancellor, said his party won’t agree to any changes in the bill. “Let me be perfectly clear: This law will not be changed,” Klingbeil said at a party event in the southwestern city of Ulm on Saturday. “We will pass it in the Bundestag.”

Merz took office at a daunting time for Germany. An erratic and occasionally hostile U.S. president had just returned to the White House, the war in Ukraine had shut off the energy supplies for German industry and upended the country’s assumptions about security, while relations with China were deteriorating and the long struggle to manage immigration had fueled the rise of the far right.

In his first speech as chancellor, Merz promised to fix all that.

He said he would stop mass migration, turn the chronically under-financed Bundeswehr into Europe’s strongest army and end one of the longest economic slumps in post-war German history.

“We can, through our own efforts, once again become an engine of growth that the world looks upon with admiration,” Merz told lawmakers in Berlin. Germans would feel the first effects of renewed economic growth by summer, he promised.

Six months later, voters are still waiting.

Instead, they hear daily reports of economic uncertainty and job cuts at major German companies. Last week, Merz’s advisers trimmed their German growth forecast for next year to below 1%, underscoring the scale of challenge the chancellor faces in restoring meaningful expansion to the euro area’s biggest economy. They cited long-term problems with the economy and geopolitical changes that threaten Germany’s export model.

Investors, too, have been reassessing the outlook for Germany. Stock indices focused on the domestic have shown minimal gains since Sept. 30, after surging in the first nine months of the year. While defense stocks have tumbled, led by a decline of more than 20% in Rheinmetall AG.

While economists and officials recognize that it’ll take more than six months for the government’s €500 billion ($580 billion) infrastructure package to have a visible effect, voters are already getting frustrated that trains are still late, bridges are still crumbling, and highways are still closed. Politically, the only result of the plan so far has been that conservatives blame Merz for breaking a promise to contain borrowing and are worried about the country’s fiscal situation.

Critics have targeted Merz for his short temper and what they call a divisive tone. During his time as opposition leader, his sharper edges were sometimes seen as an asset. As chancellor, they can be problematic.

When he tried to explain his government’s stricter migration policy last month, the chancellor bragged about the growing number of deportations and, indirectly, complained about the number of migrants still in Germany’s inner cities — a remark that was seen as racist by some and even triggered protests. His reaction did little to smooth things over.

“Just ask your daughters, if you have any, what I might have meant,” he told a reporter in Berlin. “Everyone will confirm that there’s a problem, especially after dark.”

Foreign Minister Johann Wadephul, a close ally from Merz’s Christian Democrats, added to the problems in the coalition on a visit to Damascus when, shocked by the damage to the city, he told reporters that his government could not deport Syrian refugees there — a direction contradiction of coalition policy.

The comments were welcomed as a sign of humanity by the Social Democrats, the junior partner, but Merz’s lawmakers were outraged. Eventually, the chancellor overruled his top diplomat but resisted calls to fire him.

One lawmaker, who spoke on the condition of anonymity, said that although the outcry was ostensibly directed at Wadephul, the real target was Merz.

Merz has made a more favorable impression on the international stage. He met with a number of leaders shortly after his election and secured an invitation to the White House where he established a friendly rapport with Donald Trump. But that hasn’t delivered any concrete results.

Trump is simply too erratic and unpredictable to establish a working relationship, according to one German official, who asked not to be named discussing dealings with the White House.

Merz also caused confusion at an October meeting of European Union leaders, when he incorrectly reported a trade agreement with the Mercosur bloc had been concluded. He later brushed off the mistake as a minor issue.

“A great advantage of age is that one becomes more serene and learns to distinguish between what is essential and what is not,” Merz told reporters on Nov. 11, his 70th birthday. “I am grateful that I am fit and healthy and can fully concentrate on my duties as chancellor.”

The next year will be crucial.

More of his government’s economic policies will kick in in January and officials hope that companies and consumers will start to feel the effect. There will also be five state elections which will gauge his progress with the electorate.

In two eastern states of Mecklenburg-Vorpommern and Saxony-Anhalt, the far-right AfD has a chance to win absolute majorities and take power at the regional level for the first time.

“The state elections next year will certainly create some anxiety,” David-Wilp said. “It’s in the interest of this coalition to keep it together because the AfD is doing so well.”

(Jan-Patrick Barnert, Iain Rogers, Christoph Rauwald and Jenni Thier contributed to this report.)

©2025 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.