Politicians, economists and CEOs react to result

As a new chapter in German politics begins following the federal election at the weekend, there’s a distinct feeling of déjà vu in Berlin as a center-right alliance prepares to once again take the reins in Berlin.

The conservative alliance made up by the Christian Democratic Union (CDU) and its sister party the Christian Social Union (CSU) won 28.6% of votes in Sunday’s ballot, followed by the far-right Alternative for Germany (AfD) in second place with 20.8% and the center-left Social Democratic Party (SPD) in third with 16.4% of the vote, according to preliminary results from the Federal Returning Officer.

The results, set to be confirmed Monday, mean the CDU-CSU’s Friedrich Merz will likely be Germany’s next chancellor, taking over from the SPD’s Olaf Scholz after his three-party coalition collapsed late last year.

The CDU-CSU is no stranger to power having led multiple “grand coalitions” in Germany over the last century. Now, it’s expected to form a new ‘old’ coalition, with the center-left SPD being the most likely partner for the alliance, although the Greens have not been ruled out from partnering with the union.

Familiar challenges remain for Germany’s new leadership, however, with a flagging economy and the need to increase domestic spending — much of which is contingent on German lawmakers being able to reform a restrictive debt-limiting rule known as the “debt brake” — forming an immediate and pressing concern.

Then there’s Germany’s difficult relationship with the world beyond, namely, with U.S. President Donald Trump threatening trade tariffs that will hurt Germany’s limping car industry further.

German and U.S. politicians, economists and business leaders are in no doubt as to the hurdles a new government faces but the prospect of a new administration has kindled hopes that there will be change for the struggling economy.

Here’s a selection of the immediate reaction to the German election result:

“We have won it because the CDU and CSU worked well together and we prepared very, very well for this election and also for taking over governing responsibility,” Merz said on Sunday as exit polls emerged, signaling the alliance’s victory.

In a press conference on Monday, Merz made clear that he was aiming for a coalition with the SPD, stating that talks could begin immediately.

“It is a bitter election result for the Social Democratic Party. It is also an election defeat, [and] I think that needs to be said once clearly, from the start, given a result like this,” Scholz said at the party’s headquarters Sunday night after the SPD’s drubbing in the ballot.

“This time the election result is bad and therefore I also have responsibility for this election result,” he added.

“It’s going to be complicated” to form a new coalition, Brzeski told CNBC’s Annette Weisbach in Berlin on Monday.

“We only have one option and that is another grand coalition. The problem will be that the SPD is extremely hurt – the worst result ever – so they will be in a kind of existential crisis.”

“We will get a bit of cyclical support, we’ll get some tax cuts, we’ll get probably also some investment programs. But the big elephant in the room remains will we get changes to the debt brake? And I think in the current constellation of the next parliament, this will not be possible,” he warned.

Siemens Energy Chairman Joe Kaeser told CNBC that the new German government will face “quite an uphill battle” and needs a long-term agenda to restructure Germany over the next five years.

“It is a restructuring case, we need to be honest about this one,” he told CNBC’s Julianna Tatelbaum on Monday.

Kaeser said a “2030 agenda” should have five key areas, focusing on the economy, infrastructure and energy, education and innovation, restructuring the pension system and, lastly, “regaining government control and government reforms.”

“People in Germany are wondering, is our country safe? And they are wondering whether the government and institution have everything under control. That’s been one of the main reasons why so many people were looking towards this AfD, because they’re wondering whether our government, our state, our country, is still in control.”

“From our perspective, it’s really time to act, and after yesterday’s election, we wish that the new German government will form together quickly and then enter into decisive, immediate action and also a long, clear, long-term vision and a roadmap to really bring Europe’s economy back on track,” he told CNBC’s Carolin Roth on Monday.

“I think Germany’s manufacturing sector requires some urgent action in terms of taxes, in terms of energy costs, and also in terms of flexibility of the labor market. There’s three big, big things that are important for everyone in the manufacturing sector. For the automotive industry, of course, regulation is a top issue.”

“Looks like the conservative party in Germany has won the very big and highly anticipated election. much like the USA, the people of Germany got tired of the no common sense agenda, especially on energy and immigration, that has prevailed for so many years,” President Trump posted on his social media platform Truth Social on Sunday night.

“This is a great day for Germany,” he added.

“I think it’s very good news for Germany. I am actually quite close to Friedrich Merz,” Emerson, former U.S. ambassador to Germany, told CNBC Monday, reacting to Friedrich Merz’s comments on Sunday night that it was “absolute priority” to “strengthen Europe as quickly as possible so that we can achieve real independence from the U.S. step by step”.

“I think he is dead serious about where he talked about [Sunday night], in effect, declaring independence from the United States and, I guess [U.S. Vice President] JD Vance and Donald Trump can’t complain,” Emerson, told CNBC’s Steve Sedgwick.

“Merz is a free trade guy … so I when I hear him talking about independence, I hear that as much more as ‘we need to get to a point where we can stand alone, that we Europe, can defend ourselves and do more in terms of the spending and building up of the military capabilities.’ I hear that more as a national security issue than an economic issue. Merz also has a second job. That job is to help revitalize Germany’s faltering economy.”

“What happens with the U.S., tariff-wise, or trade-wise, is extremely important” for Germany, according to Herrero, a senior fellow at economic think-tank Bruegel. “I think Europe is waking up, and Merz is the best example of this,” she told CNBC Monday.

“They [European leaders] are realizing that they need to get closer together. And that is the silver lining that could make Europe stronger, that could make Germany stronger, that could force Germany, for once, to really think of a EU level military proposal, which would, however, mean that Germany would need to leave the debt break.”

Feld, also former advisor to the former German federal finance minister Christian Lindner, commented on the likelihood of a new special fund for defense after the current one expires.

“I think it’s very difficult to interpret just because the AFD and the left party together have a blocking minority in the Bundestag so it will not be easy to change the constitution. This means if the new government wants to have a special fund for defense, it’s definitely not going to happen,” he said.

“The current special fund ends in 2028 and then additional financing is needed, and in particular if there is a need for quick rearmament of the German Bundestag of the German army then this cannot be easily solved within the current special fund and this is meaning that it very much depends on the proposal of the new government, how to reform the debt break and whether one or the other member of the left party in parliament is supporting this. You don’t need the whole faction, you need only a few of those members in parliament.”

“It’s a historic result. We doubled our numbers. We’re the only opposition party now, which is not from the left side, so we will push the new government further and further,” Storch said in an interview with CNBC.

The Christian Democrats [CDU] were campaigning on illegal migration and they were campaigning on changing the policy when it comes to economy and energy, and they will not be able to change that policy because they’re now in coalition with the former chancellor’s party, the SPD, the social democrats, and Olaf Scholz party,” she said.

“So everything they promised, they cannot deliver, and we will make that very very clear, of course, we will support every motion and every law which is tabled when it comes to stopping illegal migration but it will by no means be enough.”