Merz seeks to rescue German reform agenda after election debacle

Arne Delfs and Michael Nienaber, Bloomberg News on Sep 22, 2026

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German Chancellor Friedrich Merz will confront conservative lawmakers in Berlin on Tuesday after the Christian Democrats’ worst-ever state election result to find a way to salvage his reform agenda.

Merz secured the backing of CDU party leaders to stay on as German chancellor on Monday, fending off for now what was shaping up to be the biggest challenge to his tenure after 16 months in office. The conservative party saw its support collapse in the northeastern state of Mecklenburg-Western Pomerania on Sunday as the party was knocked out of a state assembly for the first time in the country’s post-World War II history.

The chancellor is likely to hear fresh grievances from legislators in the Bundestag caucus. A senior lawmaker said she expects a discussion on Merz in light of recent electoral defeats, even as the parliamentary group looks to redouble efforts to see through a reform agenda to overhaul the pension and health systems.

“Of course there is frustration in the group,” chief caucus whip Catarina dos Santos-Wintz told reporters in Berlin Tuesday. “But the chancellor has the full backing of the caucus group.”

The political establishment in Berlin was shaken when the CDU suffered a stunning defeat to the far-right Alternative for Germany two weeks ago in Saxony-Anhalt, where it could lead the first far-right government since the country’s founding in 1949. The fallout continued as the party crashed out of the Baltic coast state and lost to the anti-capitalist Left party in the city-state of Berlin on Sunday.

Though Merz kicked off his tenure last year with a commitment to spend more on defense and infrastructure, he’s struggled to shepherd through reforms to boost the beleaguered economy. During the campaign for state elections, he was largely kept away from voters, reinforcing the view that he’s out of touch with citizens.

The tumult has cast a shadow over the coalition’s efforts at stabilizing the pension and health systems, introducing a tax cut for families and slashing red tape and labor costs. They’re a central commitment of Merz’s government as Europe’s largest economy grapples with the world’s highest energy costs, exposure to trade tariffs for its export-driven industries and bureaucracy that weighs on competitiveness.

But Merz’s stumbles have undermined progress. Soon after he won backing for the overhaul plans in July, he bungled a Cabinet reshuffle, drawing fire from party rank-and-file after he abruptly dismissed his transport minister.

Merz’s Social Democratic coalition partner, also taking stock of the latest fallout, threw into question parts of a broad pension overhaul. Labor Minister Bärbel Bas, an SPD co-leader on Monday signaled that some elements could be changed, particularly abolishing an early-retirement option, a proposal that prompted public pushback.

The SPD approved a strategy paper that included language resisting a proposal to scrap in full an option to draw pensions after 45 years of work. But it embraced the broader pension plan laid out by a commission in June, a blueprint that Merz pledged to adopt in full. Bas had said in June that said there must be “no cherry-picking.”

The far-right AfD more than doubled its support in Mecklenburg-Western Pomerania, the latest demonstration of its appeal to voters with calls to deport migrants and attacks on the political establishment. The CDU, which governed the region after German reunification in the 1990s, dropped to below 5%, a result that Merz called a “disaster” on election.

But CDU leaders in Berlin didn’t demand that Merz resign — and didn’t hold a discussion about whether he’s the right person to lead, according to people familiar with the deliberations.

Facing little resistance, the chancellor said he was determined to press on with his agenda. The party’s focus turned to that effort, while taking into account public resistance, the people said on condition of anonymity as talks aren’t public. Several CDU leaders weighed softening measures to make them more amenable to low-income earners — an assessment with which Merz agreed, they said.

“We want to move the reform process forward, but we want to offer answers for people and their concerns,” Merz told reporters on Monday.