Incoming Germany Chancellor Friedrich Merz has a heavy lift: shake Europe’s economic engine out of stagnation. Markets are cautiously optimistic.

A graphic showing European Union (EU) election results in Germany from June 2024 was shared online with false captions saying it showed the outcome of the federal election held in February 2025.

Germany's annual inflation rate was 2.3% in February, in line with the forecast, according to provisional data by Destatis on Friday. Prices of energy products fell by 1.8% in February on a yearly basis, while food prices went up by 2.4%.

Germany's economy is in desperate need of foreign labor, but a political environment hostile to all kinds of immigrants makes it seem unlikely they'll get it.

The European Union is getting good at adapting to unprecedented circumstances. Over the last five years, the 27 member countries have pulled together to fund the purchase of tens of millions of vaccines and devised a massive recovery fund to resuscitate economies ravaged by the pandemic.

After his election win on Sunday, Friedrich Merz is set to take charge of Europe’s biggest economy with the US defense umbrella looking shakier than any time since the NATO alliance was founded and Donald Trump is discussing the continent’s security with Vladimir Putin.

The US has allocated the most of any single country, $119 billion, according to the Germany-based Kiel Institute for the World Economy, which catalogues aid to the war-torn country through its Ukraine Support Tracker, focusing on government-to-government transfers.

These safeguards — keeping annual deficits below 1.5 per cent in the long term, and reducing excess debt by at least half a percentage point per year — “bite more” for the likes of Germany, Finland and Austria, one EU official said, due to their relatively low debt burdens compared with the EU’s average.