Nine months into the chancellorship of Friedrich Merz, the outlook for Germany looks grim. The country’s economy, the world’s third biggest, has been in recession or stagnation for the past three years as its leaders confront the worst economic crisis since the 1950s. Damningly, portions of the German press have accused Merz of presiding over an ‘economically lost year’.

Last year’s data makes for tough reading: industrial production was down 1.3 per cent and large corporate bankruptcies up 25 per cent. In the first six months of the year, 109,000 manufacturing jobs were lost. 48,000 of these were in the battered car industry which has a 24 per cent share of total industry revenue. The few rays of light were German arms producers like Rheinmetall and drone start-ups – but arms-making represents just 0.6 per cent of the country’s industry revenue.

Only two areas saw solid German ‘growth’ last year: electricity costs and government spending. Germany now has the highest domestic electricity prices in the developed world. Meanwhile, government spending rose to 50.4 per cent of GDP.

Yet you wouldn’t think there was an economic emergency demanding big answers thanks to the timid tinkering and social welfare and tax gifts Merz bestowed on the country last year. Merz’s Christian Democratic bloc and its Social Democrat (SPD) junior partner are a poor match for getting things done. Traditionally bitter rivals, former chancellor Angela Merkel normalized such coalitions between the parties. Merkel moved the Christian Democrats to the left while the SPD, once the party of workers, has shifted to being the advocate of welfare recipients and migrants.

The decay in the country is becoming increasingly visible

So far, there’s scant evidence that Merz has the stomach for an epochal battle with the SPD and parts of his own party who are resisting the root and branch changes needed to fix the German economy. Merz’s biggest defect is that he lacks a killer instinct to use his power to get things done. Past Christian Democratic chancellors including Merkel, Helmut Kohl and Konrad Adenauer, had this in spades.

Germany has been here before. At the start of the century, it was labelled the ‘sick man of Europe’ as it struggled to catch up following the reunification of the country in 1990. Unemployment hit nearly 12 per cent and there were two years of economic contraction. Then SPD chancellor Gerhard Schröder responded with radical reforms of social welfare and labor law, dubbed the ‘Agenda 2010’, which are widely credited with resurrecting the economy.

But this time, things are different. The country has fallen behind international standards, including in gene technology, AI and nuclear after the........

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