Merz promises economic boost, neglects climate policy in first govt declaration

Germany’s new chancellor Friedrich Merz has announced a mixture of policy restarts and continuity in his first government declaration in parliament, in which ideas on energy and climate policy played only a minor role. Merz said he aimed for “a change in our politics” and a “rethinking” on key policy matters but also promised “reliability and predictability” for Germany’s international partners. While the conservative Christian Democrat (CDU) leader said his coalition government would not venture into new “ideological mega projects,” he also lauded the work of his predecessor Olaf Scholz’s government as “historic,” given the multitude of challenges, including the energy crisis and the war on Ukraine, that the previous government had faced. Merz leads a coalition government of his conservative CDU/CSU alliance and Scholz’s Social Democrats (SPD).

After Merz got off to a bumpy start as chancellor with an unprecedented second round of voting needed in parliament, observers have urged his government to table convincing plans for climate and energy policy within the first 100 days in office. His inaugural speech in parliament on 14 May suggested that the former financial industry manager sought to tread lightly on delicate topics and provide the impression of a “statesman”, the Süddeutsche Zeitung commented. The new chancellor announced plans to prop up Germany’s military and become a pillar of European defence capabilities, and his promise to revive the country’s economy after an extended period of weak growth and mounting challenges for German industry.

A focus in energy policy therefore would be affordable prices and an approach that is both “non-ideological and technology-open,” Merz said. However, national and European emission reduction targets would not be questioned, he stressed. The central vehicle for climate policy should be carbon pricing, the chancellor said, adding that revenues from the CO2 price should be returned to “the economy and to citizens” in some form, without mentioning the climate bonus payment scheme that the CDU had suggested in its election campaign. The chancellor said Germany’s major investment package in infrastructure and climate neutrality would mean the country would remain competitive and prosperous, which he would seek to couple with reforms that cut bureaucracy and push digitalisation. Research funds should be directed at new industries, including nuclear fusion, he added.

The chancellor’s emphasis on economic growth was received well by industry representatives. “With this clear prioritisation, he has given the German economy a reason for optimism,” said Bertram Brossardt, head of the Bavarian industry association vbw. Brossardt said the planned special tax write-offs, reduced bureaucracy, and the “urgently needed” cuts in energy prices were particularly important.

However, NGO Germanwatch said that the clear commitment Merz had made to Germany’s and the EU’s climate targets were undermined by a lack of clarity as to how these should be achieved. His government’s priorities in security, economic policy, and industrial growth are all linked to climate policy, said NGO head Christoph Bals. But “a credible implementation strategy” for how this nexus should be addressed was lacking, Bals argued. Lowering energy prices should relate to clear renewables expansion and integration measures, for example. For achieving greater international security, making clear commitments to support international climate funding was another opportunity Merz had missed in his speech, the NGO added.