Can Germany Afford to Be Europe’s Protector?

Before Friedrich Merz won Germany’s parliamentary elections in February of this year, the country faced a money dilemma: Germany’s economic stagnation required significant reform and investment to revitalize industry, and the United States demanded more spending on collective defense. The budgetary dispute over how to simultaneously address these conflicting priorities had led to the collapse of Chancellor Olaf Scholz’s government. To avoid the same fate, lawmakers in Merz’s grand coalition, comprising the center-right Christian Democratic Union and the center-left Social Democratic Party, as well as the Greens, agreed to leverage debt to finance its dual obligations. Suddenly, Germany was flush with money.

Seven months in, however, Merz’s government has still been unable to chart a course for economic reform and persuade voters that better days lie ahead. Merz’s bold moves on defense spending have confirmed Germany’s leadership role in Europe but at a cost to his domestic popularity. Merz’s expenditure of significant political capital at international summits to manage U.S. President Donald Trump and defend Ukraine has left him vulnerable to accusations that he is focusing too much on foreign policy and not enough on domestic issues. The right-wing, Russia-friendly Alternative for Germany party (AfD) is channeling economic anxiety to profit in the polls, criticizing Merz’s government for squandering German wealth to build a “war economy.” And although Merz’s efforts on defense have won him praise from the White House, the Trump administration is steadily undermining him by normalizing the AfD and—in the words of the newly released National Security Strategy—other “patriotic European parties.”

This article originally appeared in Foreign Affairs on December 23, 2025. Read the full article here. The views expressed herein are those solely of the author(s). GMF as an institution does not take positions.