Term Member Meeting: Germany’s Next Chapter—Post-Election Analysis and Global Impacts

Panelists discuss the February German election results and their implications for Germany’s domestic policies, NATO commitments, and the broader European landscape, with insights into how Germany’s new leadership could reshape alliances and influence the continent’s future.

CFR’s Stephen M. Kellen Term Member Program is pleased to be hosting this event with the American Council on Germany’s Young Leaders Program.

SOKOL: Thank you, Meaghan. I have to say that the American Council on Germany is delighted to partner with the Council on Foreign Relations to hold today’s discussion for ACG Young Leader alumni and for the CFR’s Stephen M. Kellen term members. My name is Steve Sokol. I’m the president of the American Council on Germany. And I am honored to be moderating today’s discussion.

It’s especially important to me to be able to cohost this event with CFR because Stephen Kellen was involved with both organizations. And I’m certain that he would have been extremely pleased to see the investment of both ACG and CFR in the next generation of global leaders. And so I’m really excited about the event, about the discussion, and about the collaboration.

A little over a week ago, on Sunday, February 23, German voters took to the polls. And by the end of the day, we had a good indication of the election results and a sense of the path forward for Germany. To talk about the German election and the broader geopolitical environment I’m joined by two experts and long-time friends of mine. Dr. Liana Fix is a fellow for Europe at the Council on Foreign Relations. She’s based in Washington, D.C. She’s a historian and a political scientist by training and has expertise in German and European foreign policy and security policy, as well as the transatlantic relationship, Russia, and Eastern Europe.

Liana, herzlich willkommen.

FIX: Danke schön. Thanks so much, Steven.

SOKOL: And Jan Techau is director with the Eurasia Group’s Europe Team. And he covers Germany and European security from Berlin. He served as the head of the speech—of speechwriting in the German Ministry of Defense from 2020 until 2023, and before that he was the director of Carnegie Europe in Brussels and ran Europe programs at the German Marshall Fund of the United States. Jan, great to see you. Herzlich willkommen.

TECHAU: Thank you very much, Steve. It’s an honor.

SOKOL: So, look, I don’t want this to be a bait and switch. I know that we gathered today to talk about German politics, and I promise we’ll get there. But I think we have to talk about the recent developments surrounding the war in Ukraine. That’s, I think, top of mind for all of us. Jan, you’re sitting in Berlin. And I want to start by asking you what the German reaction has been to Friday’s Oval Office meeting between Presidents Donald Trump and Volodymyr Zelensky, but also yesterday’s news that the United States will suspend military assistance to Ukraine.

TECHAU: Yeah, Steve, thanks a lot. No, I mean, this is just the latest, of course, in what I would say is a three-week period of an increasing feeling—a feeling of alienation and fear over here on the European side, that started with Munich, the Vance speech, then came Trump’s accusation against Zelensky, that he really started the war, and then Friday’s meltdown, and now this announcement, and a couple of things in between. So the anxiety level here in Europe is really up. At the same time, we also see a fairly strong counter reaction, both on the crisis management side and on the fiscal side. We can go into details about this a bit later. There is a profound sense that the Europeans are on their own. You know, for some people that’s the scariest thing in the world. For other people, that’s, you know, finally, you know, we can prove our worth. The truth is probably somewhere in between.

People over here know full well that if the United States was serious about, you know, abandoning Europe, security wise, that the Europeans, even if they bend over backwards, couldn’t replace that easily. Or, you know, perhaps in some parts, not at all. So they’re looking at two things in particular. One, you know, what kind of deal, if there is any to be had, comes out of the Ukraine situation, because people will see that as an indication as to how—to what extent the U.S. is still committed to European security. And then, of course, what happens in the run up to the NATO summit later on in June of this year. Most likely what’s going to happen there, you know, to what extent does Article Five still hold? We hear mixed things from the U.S. administration behind closed doors.

People like Vance and Hegseth will be a lot more constructive, you know, reassuring the Europeans that Article Five will not be compromised, that the Europeans will not leave. But in public, you know, then they say very different things. And we also all know that the real agent in all of this is Trump himself. So lots of anxiety. Pretty sturdy reactions. We’ve seen the crisis summit on Sunday in London. We see a lot more money coming online. We see announcements by commission president von der Leyen today on EU fiscal tools being brought into the—into the scenario as well. We see a German situation where there’s a frantic scramble towards a constitutional change that should bring more money online as well. So it’s a mixed bag, but, you know, overall anxiety levels are pretty high.

SOKOL: So we will undoubtedly get into some of the points that you just raised, particularly that German frantic scramble—because I think that ties into the post-election situation very, very much. But before we do that, Liana, I mean, you’re sitting in Washington, but I know that you’re extremely well connected in Germany and across Europe. What sorts of things are you hearing in terms of the response to these recent developments?

FIX: So, I mean, from a Washington perspective, I think this U-turn that Donald Trump is de-facto doing towards Russia has been something which, sort of looking at the broader scheme of—grander scheme of things is not entirely unsurprising. So we do very clear—we do see very clearly the setup of the talks as we have them right now, with the Riyadh talks, but also discussions with Russia proceeding on embassy openings, options for sanctions relief being developed. That shows very clearly that the whole strategic aim is not necessarily to end the war in Ukraine, or not even necessarily the Nobel Peace Prize—even if that’s what Donald Trump certainly likes to get—but the whole strategic aim here is a normalization of U.S.-Russia ties. And Ukraine is the subset. Ukraine is the problem there. Ukraine is the nuisance there. That also explains the approach of the Trump administration.

And the cut to Ukraine aid obviously raises the stakes because, from a European perspective, there was very much a message that, after the catastrophic meeting in the White House between Zelensky and Donald Trump, there needs to be coming back to the table, right, between Ukraine and the United States, between Zelensky and Trump. But what Trump is doing now with the Ukraine aid cut is to raise the stakes and to say, well, if Ukraine comes back to the table, they need to fully surrender, right? They need to apologize, they need to ask for U.S. help to be resumed, and to take themselves out as an actor—as an independent actor in these negotiations, putting themselves into a position where they basically just would agree to whatever the U.S. and Russia negotiate between. That’s sort of the aim of this cut off of support.

And that makes it very difficult for Europeans, as has been the case in the past, to pursue an approach of let’s work with the Trump administration for as long as we can because, as Jan said, the honest response to voters across Europe would be, we want to stand on our own feet, but we need time. We can’t do this as quickly as we would wish to. And we will have a period—if the United States fully withdraws from European security—will have a period of reduced security for Germany and Europe for a certain period of time. And to limit that time, the idea is to slow down the process, right, to try to engage Trump for as long as possible until really the last proof is given that you can’t engage with them, and to buy time for Europeans to invest in their own defenses so that this kind of security vacuum that we will have—it’s not a full vacuum because, I mean, there are some military capabilities in Europe, that this period of time will not be too long.

And it’s a tough—it’s a tough situation to be in because, in the end, Europeans will have to decide if they agree that Ukraine and Zelensky are humiliated and taken out of the game, or if they decide to stand up for Ukraine and to support Ukraine in its resistance against Russia, and, again, Donald Trump. But, unfortunately, in terms of escalation dominance, Trump has the stronger levers here.

SOKOL: Let me pick up on this—on this notion of, you know, reduced security in Europe, and ask you both to talk a little bit more about that. I mean, I think for many people the U.S. security guarantee was something that many people took for granted. They didn’t think it would ever go away. Jan, you and I saw each other in Munich. We heard the Vance speech. We talked about it afterwards. Lots of people were wringing their hands and talking about this as a wake-up call. But really, I think the only way to describe the Vance speech is as a massive fire alarm after countless wake up calls over the last decades about how serious the situation is. And so I’m curious to hear from both of you how people in Europe are feeling about this reduced security in Europe right now. Is the concern high enough so that people are taking it seriously? Or is it just sort of it’s not going to get as bad as people think it’s going to get?

TECHAU: If you want me to start, I think, you know, the Europeans are now very, very serious about this. But this came in stages. And it, you know, wasn’t an easy acknowledgement for many Europeans. You know, basically the first little turning point was in 2008. Then came the annexation of Crimea in ’14. This is when defense budget started to climb up again. The trend was reversed on defense spending but, in the beginning, very timidly. And then after the war broke out in ’22, of course, everything all of a sudden was a lot more serious. And then I would add to this list last Friday, when even, you know, the most ardent believers that, you know, America would never turn on the Europeans themselves, you know, started to rethink.

I think the Europeans had a lot of time to get used to the idea of a U.S. that is more transactional. But what they see now is something much worse, which is that the U.S. is not just transactional, but also predatory. You know that all of a sudden they’re turning on the Europeans. They’re adopting the agenda of the perpetrator, of Putin. And that it’s not just transactional and cannot be dealt with transactional tools any longer. And this is where that scare level that I mentioned earlier is coming from. I think, you know, there are still pockets, of course, in Europe that are asleep. And there are still a lot of people, you know, for whom this is a head thing and not a heart thing, so they understand it but they, you know, kind of, you know, still push back internally.

The cognitive dissonance is quite high and strong because, of course, the original deal for European security after World War II was quite comfortable for the Europeans. But not just comfortable, it was also quite comfortable for the U.S. because, for a fairly limited amount of money, you would get some sort of hegemonic situation in Europe, right? This was a deal that was struck. Europeans were meant to spend less on defense so that they could pacify their societies. You know, and the U.S. was willing to, you know, shoulder most of the burden of the security guarantee. Now that no longer applies. But when you have gotten used to these kinds of patterns, those are not just thinking patterns. Those are spending patterns in your budget. Those are socialization patterns in your society.

That is very, very hard to change. And now the Europeans need to change it in a fairly—you know, and they were asleep for a long, long time, especially the Germans but not only. And now they have to learn it within a short period of time. That’s going to create a lot of friction. And I think what Liana said just a minute ago, about, you know, how the Europeans—you know, there is a risk there will be less security because, you know, Europeans, should America abandon them, cannot, you know, fill all of the gaps immediately, or even within the medium-term time period. There will be less security. That’s the difficult part.

The bigger question that I’m asking myself is, to what extent is that ultimately in the American interest, in the U.S. interest? It might be in Trump’s interest to have this situation, but there’s also U.S. interest here involved, which might, you know, be slightly different from what Trump thinks it is. So that’s question that I would play back to the other side of the Atlantic from here.

SOKOL: Thank you, Jan. Liana, if you have something to add you’re welcome to do it, but I wanted to sort of pivot a little bit, in as much as in 2021 you wrote a book called A New German Power? Germany’s Role in European Russian Policy. And I was thinking about that as I was watching the developments over the past weekend, when British Prime Minister Kier Starmer brought together eighteen European leaders to talk about the path forward on Ukraine. We all know that later this week, on March 6, there will be an EU summit to discuss the future of Ukraine and the transatlantic partnership. And while this is happening, Germany’s outgoing Chancellor Olaf Scholz is in that caretaker role and representing Germany, and the presumptive new chancellor, Friedrich Merz, is not in office yet. And so how does Germany sort of fit in at this moment? And do you see sort of a leadership role for Germany?

FIX: Yeah. Let me quickly make three points on these issues.

The first point is, I think it’s true that there are U.S. interests, as Jan said, but what has been shocking to observe here in Washington is that the whole idea that we all had in terms of, well, there are camps around Donald Trump, and you have to influence those camps that are more trans-Atlanticist, and so on, has really a vaporized, right? So this is very much a surrounding of people not contradicting the president. So I don’t think we can place our bets on teams around him, on infighting. I’m not sure how much we can place our bets on the Supreme Court. So the damage that Donald Trump can do is real.

If he leaves NATO, it leaves a security vacuum, or if he just continues to undermine Article Five in the way we have seen, it leaves a security vacuum. Real reduced security in Europe. And that is a concrete military challenge, right? I mean, we do have Russian medium-range missiles in Kaliningrad. We had a commitment by the U.S. president to station medium-range weapons in Germany. Will Trump still do that? So it’s not like this is an abstract scenario. And the worst case situation would certainly be if, because of this reduced level of security, European leaders fear that they have to combine their rearmament with some sort of temporary appeasement of Russia, right? To say, well, let’s not escalate too much. I think that could be one reaction to fill this period of time of reduced security. Or the alternative could be to say, well, in this period we need, you know, Ukraine more than we’ve ever needed them. And that’s why we support them with a European mission to stand their ground. I think these are two choices that Europeans will have to make.

And because you referred to my book, Steven, I was always thinking about 2008, the Georgian-Russian war, because actually at that time Europeans have acted not too differently from the Trump administration right now. (Laughs.) So French President Sarkozy flew to Moscow, negotiated a deal with Moscow, tried to impose that deal afterwards on Saakashvili and on the Georgians. And then we had an unarmed EU monitoring mission in Georgia, Russia not complying with the ceasefire at first, not allowing the monitoring mission on its side, and Europeans at the same time pursuing a reset with Russia relations, arguing we need more, not less, relations with Russia. (Laughs.) So just as a reminder for us all that the way how Trump behaves towards Russia, it’s not too long ago that Europeans have also behaved towards Russia in that way. But, of course, a lot has happened in between.

And pivoting to Germany, one quick point. I think it’s shocking that all these truths about foreign policy have not had a role in the election campaign. And I do feel this is a little bit undemocratic of German voters, to not have given them the choice to also vote about their own security future. Do they want massive investment? Do they want a European mission in Ukraine? That has not been something where any German party has taken a stance, right, out of fear, probably, that they would overwhelm the German voters. But what we do see now is, the day after the election, a lot of cooperation. So it seems that Scholz and Merz are cooperating closer than expected on these questions, realizing this is a big—a big topic. They have coordinated their messages on Zelensky and so on.

So there seems to be a feeling that this is a situation for the grown-ups now. And even though coalition talks will be long, it is clear to all sides that Merz should be put into a position where he can already act on the European international level, although I’m not sure anymore how quickly he really wants to come to Washington after the Zelensky debacle, because he would not be able to do the same show as Macron and Starmer did.

SOKOL: But, I mean, if Merz comes he might do the same thing that Angela Merkel did when she was chancellor and visited Donald Trump, of not being provoked in quite the same way and just sort of saying, we can have that conversation when we’re, you know, away from the press and away from the cameras. I think—

FIX: Well, hopefully Merz does a joke about Angela Merkel that puts him on a good relationship with Donald Trump, because that’s something that they both have in common. They really don’t like Angela Merkel.

SOKOL: Have in common, yeah. You know, I think—and I’d like to sort of try to bring it to the election now, and to the path forward. I think all of our viewers and listeners are aware of how the German election went. The Christian Democrats, which are led by Friedrich Merz, were the winners of the election, with 28.5 percent of the vote. This was still sort of a lower result than what they had had in the polls, and certainly far lower than what Friedrich Merz had wanted to have. But it puts them in the driver’s seat as they try to form a coalition. The most likely—pretty much the only coalition partner is the Social Democrats, which is the party of Olaf Scholz. And they are down to 16.4 percent from the 25.7 percent that they had in 2021. This is the worst result for the party in the post-war period.

But it means that they can strike a tough bargain. And, Liana, you said that the coalition talks will be long. Both Friedrich Merz and Social Democratic leadership have talked about trying to have quick coalition agreements, or negotiations to get to an agreement and form a government very, very quickly, by Easter, ideally. But right now, you know, the big sticky wicket is around defense spending, and whether there should be another special fund for defense spending, what might happen to the defense—sorry—to the—what might happen to the debt brake, which is basically what brought down the last government, the traffic light coalition. And so even before the coalition negotiations have started we’re seeing a lot of jockeying around defense spending.

Jan, can you talk a little bit about this Sondervermögen, and how things might unfold before the Bundestag meets next Monday on the 10^th of March?

TECHAU: Yeah, of course. I mean, basically you have this attempt now to create two special funds, one for defense and one for infrastructure investments. It means that, in reality, the coalition negotiations have already started before they have nominally started because, you know, already basically they’re sorting out the fiscal situation that they will end up with once they start the next government, potentially, in the grand coalition. So what’s happening here at the moment is that they’re trying to use the majority in the outgoing parliament to create three special funds with a two-thirds majority of the conservatives to Social Democrats and the Greens.

That’s a majority that will no longer exist in the new parliament, where, you know, the AfD and Die Linke combined can potentially wield this very, very, you know, a powerful sort of a blocking minority, where they can stop a two-thirds majority from coming together. But a two-thirds majority is needed to change the debt brake rules, these very strict German fiscal rules. And if AfD and Die Linke play hardball, that would mean that the next government would be shackled fiscally, basically, from day one. This is why the day after the elections, last Monday—or, Monday a week ago, this idea emerged, let’s do constitutional change very quickly with the old majority, as long as we still can.

Initially, the idea was to create just 200 billion for defense, a new special fund. You know, a special fund means that they borrow money and put it outside of the regular budget. It’s an extra budgetary vehicle, essentially, with a running time of four to five years. And that initial idea of 200 billion for defense was then very quickly pushed aside after the Friday meltdown in the Oval Office, when they decided to go much, much bigger, and also to strike a compromise between the defense needs and the other civilian infrastructure investment needs. So over the weekend what we’ve seen is, you know, something that is now four times that size, roughly, a 400 billion fund for defense and a 400 to 500 billion fund for infrastructure.

Two special funds, essentially, to give the next government, and potentially governments thereafter, spending firepower essentially on two of the key components that the next government would have to do anyways. All of this, and this is very important to understand, against the backdrop not just of an escalating geopolitical situation for the Europeans and the Germans, but also a profound German economic crisis, that has really only just started. You know, we’ve been talking about it now basically for a year, but Germany hasn’t had growth in five years. Has had a recession for two years in a row and might have another recession year this year. Growth projections are very, very low. You know, this is creating massive, massive deficits on the budgetary side. This is a situation in which the German economy loses jobs. We are now near the three million unemployment number again, which is a bit of a magic threshold in the German context.

So not only do we have to deal with these massively increased defense spending needs in the European security context, but also there’s an enormous investment need for the next government. And this is what they tried to do with these two special funds that they’re now creating. The probability of these, you know, coming online is very, very high. The deal has essentially been struck between the three parties involved. The majority for it is there. The time frame is there. There are no legal constraints. This can be done still, according to the rulebook. So the time frame is now that they basically hammer out the deal by Thursday this week so that already Scholz can carry this into the summit, the EU summit, on Friday.

Then they will have special sessions of parliament around the 10^th-11^th, first reading, committee work, second reading, final vote. And then the upper house of the German parliament, the Bundesrat, will decide on it on the 21^st of March, just in time so that the new parliament can then constitute itself on the 24^th. So this is an extremely tight time frame, but the most important thing is this stuff will come online. There’s a very high probability here this is not going to fail. That would be very surprising at this point.

SOKOL: Liana, listening to Jan talk, obviously, one of the big issues for the new government coming in is the budget. This is one of the issues that was not resolved in the last government. And Jan made the very important point that if the financial negotiations can take place now, before the new government forms, before the coalition forms, that might eliminate some of the issues in the negotiations between the parties. So I’d be curious to hear from you where you see the coalition partners being in alignment, presumably around foreign policy, but also where you see some of the sticking points between the Christian Democrats and the Social Democrats as they try to negotiate a coalition.

FIX: Yeah, so I always thought—I wrote about it in Foreign Affairs with my colleague Peter Sparding, that a grand coalition, if you can call a coalition between the Social Democrats and the Christian Democrats, would be the best option for Germany, because it would push through—it should be a grand coalition not of stagnation, as we’ve seen during the Merkel years. But it should be a grand coalition of reform, pushing through necessary economic reforms and all these foreign policy ambitions that we just discussed. After the election night, I was a little bit concerned that, in a typical German way, both parties would kind of try to focus more on using their leverage to get out enough ministerial posts, enough sort of policy positions, instead of focusing on the real big issues at the table. That is because the Christian Democrats didn’t perform as well as was expected. The Social Democrats basically felt in the comfortable position to say, well, yeah, we can enter a coalition, but we don’t have to, right? (Laughs.) So that already was concerning at that point.

But I do think if Trump did us a favor, he does us a favor in his actions from the last two weeks, because it basically forces the two parties to realize that there are some issues which are so fundamental now for Germany’s security that they can’t be haggling about this, right? And that’s the foreign policy issues, defense spending. I was concerned that the Social Democrats would—although they have initiated the Zeitenwende, the first defense spending budget under Olaf Scholz—that they would withdraw in a comfortable peacenik, focusing on peace position and kind of, you know, going back to the old routes, which would have been concerning. I was concerned that Frederich Merz would not be as strong on foreign policy as he promised to be in the election campaign because of his coalition partner.

But, again, I agree with Jan that this looks better than expected. And, again, who is to thank for that? Donald Trump’s action. Over all of that, obviously, the threat that comes from Putin, but the urgency—and this has been the third wake-up call in, like, the last two or three weeks, since the Munich security conference speech, right? So the urgency really helps to bring these two coalition partners together, or at least I hope so.

SOKOL: So let me—I mean, we’ll open this for questions and comments in just a moment. But, you know, this sense of urgency on the part of the coalition partners, I would love to get a sense from the two of you whether you think a new government forming just after Easter is realistic, or if you think that these talks might take a little bit longer. Obviously, there are a number of personnel consequences that we’re seeing. I mean, Scholz has said that he would not be part of the negotiation team. He’ll, you know, become a backbencher in the next government. He will not play a role. And so I’m curious, you know, what your thoughts are on how quickly we will actually see a new government emerge out of this.

TECHAU: I would say that, you know, what Merz and some other Social Democrats have said that they want to aim at something around Easter, mid-April, I think is probably slightly too ambitious. I think it’s more realistic to look at perhaps the second week of May, because, of course, the energy is there, the urgency is there, everybody wants a quick resolution. But at the same time also, you know, you have to strike a deal that not only the key negotiators can live with, but that the party rank and file, the conservative wing of the CDU, left wing of the SPD, can live with. And for that, you’ll need a document that actually is much more detailed, perhaps, than people now at this point would like it to be.

You need to present the trophies to your—you know, to your ground troops, you know, that prove to them that going into this compromise coalition was worth it. And I think this will take probably a little longer also given the fact that, you know, some of these holidays are nicely positioned in the calendar between now and then. So most likely this is going to take a bit longer than they think. The level of trust at the negotiation level is seemingly very high. This is what I hear from people, you know, close enough to the negotiators. Not much is actually leaking out, which is a very positive sign. And so the trust at that level is there, but I think to then pacify the troops and do something—and produce something presentable, especially for the Social Democrats who have to hold a party members referendum on this, I think will require a bit more footwork. And so let’s aim at, you know, probably the second week of May.

In terms of personality, Olaf Scholz is out. He will not serve in the next Cabinet. He’s not part of the negotiating team. His career is coming to an end. Very likely—not a hundred percent guaranteed, but very likely—Lars Klingbeil is the new strongman on the SPD side, more of a centrist politician like Olaf Scholz. He did a very, you know, bold power move on election night when he pushed aside Rolf Mützenich, who’s coming from the left wing of the party, as the leader of the parliamentary party. That was important for him to consolidate his grip on power. Whether he’s then going to change jobs again and move into the Cabinet or stay as Parteivorsitzender, as head of the parliamentary party, is another question. It’s quite clear to me that the SPD, even though they’re not eager to do it, will probably pick the finance ministry as the key power broker ministry. That’s really the power base that they need to come from.

There’s also talk now, because of this massive infrastructure fund that’s being put together, that there will be, you know, a newly created infrastructure ministry that will have transportation, housing, digitalization, and perhaps energy grids, and a few other infrastructure-related things in it. And then endowed with a massive budget. So that could be quite attractive, you know, for a leading Social Democrat as well. Would be a very powerful ministry in the new constellation. And apart from this, you have tons of speculations about, you know, can Pistorius stay on as defense minister? How important will he be, still the most popular politician in Germany? Is he perhaps more eager to be the next interior ministry, which in Germany is an important job as well? What does the CSU get, which, you know, delivered a disproportionate share of the vote, you know, to the conservative side of this new coalition, so they have a very strong position.

SOKOL: And this is the Bavarian sister-party of the Christian Democrats.

TECHAU: Yeah. And they—seemingly, they’re eager to also have defense, or the interior ministry. So there’s a lot—you know, a lot of loose ends. I think the sequencing is, you know, get this constitutional change out of the way, have the fiscal part sorted out, and then hammer out the details on the more tricky issues, like reform of the welfare state. You know, how to make the retirement—the state-run retirement scheme, pension scheme, more sustainable. What about migration, where the Conservatives and the SPD are probably furthest apart on all of these policy issues?

How to actually stimulate the economy? Both sides want tax reform. Merz wants it more, you know, drastically, the SPD a bit more cautiously. You know, there’s probably going to be a lot of agreement there, but how far do you want to go? How do you redistribute in a budget that already is lacking 130 to 150 billion over four years? You know, there are holes in the next budget. As you said earlier, Steve, the last government fell over budget issues. Those budget issues are still there when they come back, you know, to look at how to put together a ’25 and a ’26 budget at the same time after assuming office. So lots of tricky things still out there floating around.

SOKOL: Yeah. Liana, do you have anything quick to add or should we open up to questions?

FIX: Let me just add one thing from the outside perspective. I think that was a very comprehensive overview by Jan. Just I think Lars Klingbeil would prefer to be foreign minister, but perhaps he’s smart enough to pick the finance ministry. (Laughs.) But from the outside, it is almost impossible to explain to anyone why all this takes so long in Germany. Just to—the fact that it took three months to put together elections by mid-end February, and still all the Germans living outside of Germany didn’t get the voting papers in time. And that, again, that it takes so long under these circumstances, and for all the reasons that Jan laid out perfectly well—and it is a coalition system that Germany is—it’s just really hard to explain this to the outside world, that under this current situation of urgency it takes so long for Germany to form a new government.

SOKOL: Mmm hmm. Great point. I mean, I have a ton more questions, but I want to open this up. I just want to remind everybody that the meeting is on the record. And if you ask a question, please let us know who your question is directed to.

Tara Hariharan has had her hand up, but let me turn it over to Meaghan to begin the Q&A.

OPERATOR: Perfect. Thanks, Steve.

(Gives queuing instructions.)

And, Tara, please accept the unmute now prompt.

Q: Thank you so much. I’m Tara Hariharan from NWI.

Many, many thanks to Steve, Meaghan Fulco at CFR, and my fellow term member Alen Amini for continuing the ACG-CFR collaboration that we began when I was first a term member.

So, Liana and Jan, thank you for this excellent preview. Two related questions, one at the European and then at the transatlantic level. We’re of course, seeing simultaneously with the German defense spending negotiations this this huge potential European defense spending package, right, that could be as much as the 800 billion euros over the next four years. Do you think that the loosening of these fiscal constraints at the European level will also help push towards more defense spending at the German level? Or do you think these are—these are two independent negotiations? That’s my first question.

And then, second, to kind of bring a transatlantic angle into this, we are now, of course, right in the middle of a big trade and tariff war going on. And Europe is probably next in the—in the crosshairs for U.S. tariffs. How do you see these very dramatic moves—you know, you could say European-level, Zeitenwende that we’re seeing on the defense side. Do you think that that will be a successful bargaining chip for Europe to be able to at least mitigate the extent of U.S. tariffs? Or do you think that President Trump is still going to go after the German auto sector and after other European sectors? Thank you.

TECHAU: Steve, you want me to start? I can—I can say a few things about the fiscal side. And tariffs is not really my specialty, but I can say a few general things about it.

On the question as to whether domestic and European defense spending are related to each other, the question is—you know, the answer, of course, is yes. But the bulk of the additional defense spending needs to come from the member states. The EU tool that will bring EU funds online will only about be about 150 billion euros. The bulk will come from the member states who will be left off the hook by the European Commission on the European deficit targets. I think that’s the major tool that the European Commission can use at this point. They can basically say, if you borrow and spend on defense the deficit rules for that segment will not really apply to you anymore. So go ahead and borrow. And this is what the Germans are now doing. The Germans will actually start spending more on defense before those EU tools even come online because this 400 billion fund that we’re now talking about will be passed, you know, within the next three weeks, and will then be available as soon as the new government starts to put together budgets.

So, you know, the German fiscal loosening is already basically, you know, underway. The European tools will come online at some point between now and the June summit. The June summit in the EU is traditionally the big decision-making summit, but, you know, most of these tools will probably come online at some point between now and then. And, you know, the bigger question is not so much as to whether Germany does domestic defense spending. I think that’s decided that we will see a massive increase here. The bigger question is will Germany also participate in this coalition of the willing out of the EU context to borrow and then use that as the fiscal tool in the EU context? I think the answer to that is probably yes as well, but perhaps a bit more reluctantly than the domestic spending because debt at EU level, for Germany culturally, is often a bit of a difficult issue. It will come online. I’m pretty convinced of this. But, you know, Germany will, you know, at least slightly play hard to get on this issue, while at the same time the domestic loosening is fully underway. I hope that that kind of answers your question, Tara. And, by the way, it’s great to be in touch again. It’s been a couple of years. Great to hear your voice again.

On U.S. tariffs, I mean, the ball lies mostly, to the large extent, with the European Commission, because that’s where unified trade policy is being negotiated. They have a pretty good playbook for this. They’ve developed this over the last year or so, before the elections, even, you know, coming up with a playbook on what to do in case Trump launches the trade war, a mix of individual tools from retaliatory, to offers, to WTO measures, to closing of markets—so a pretty big mix. So on the trade front alone I think the Europeans are quite well prepared. The Germans themselves at the bilateral level have also put together a similar playbook. It’s less flexible because, you know, trade policy is an EU affair. But, for example, buying more LNG from the United States, buying more military equipment from U.S. manufacturers is all part of the German playbook as well, you know, to perhaps absorb the biggest shock of a possible Trump attack.

In the end, the Europeans are vulnerable because Trump, of course, mixes issues. He, you know, goes across portfolios. He makes defense things conditional on trade things, and vice versa, so that, you know, a strict trade playbook by the EU Commission is not even enough because, you know, you will be levered in fields where you are weaker and more dependent to grant favors in fields where you are strong and less vulnerable. I think that’s the kind of game that we should anticipate. How that’s going to play out is for the trade experts to explain. I can’t really do this. But the big fear is this mixing of portfolios so that, you know, some of the strength that the Europeans have because of their unified trade policy can be levered out and can be kind of circumvented by the U.S. side by attaching it to other things that—you know, where the Europeans are quite needy. That’s the general constellation, I think, before this big tit for tat starts.

SOKOL: Liana, any comments to Tara’s questions?

FIX: I think, just to add a few thoughts to the tariffs question. So before January 20 I would have argued, and argued with my colleague Sophia Besch on this, that the Europeans and the Germans can trade or get a buyout from tariffs, for example, by increasing defense spending, right? So that was the idea. How can we do transactional deals with Donald Trump that, in the end, benefit—still benefit the Europeans to some extent, because they have to increase their defense spending anyway. And bringing us back to the beginning of our conversation, I don’t think this is the playbook anymore, right? This is—Donald Trump doesn’t use tariffs anymore just as bargaining chips to get something else. He uses tariffs because he’s convinced those will benefit the United States too. And we see this with Canada and Mexico, right? Even if you buy a short-term—time in the short term, this will not help you in the long term.

And so I think this approach of just bargaining chips will be difficult to continue under Trump. And for Germany this is obviously a particularly tough position to be in because Germany is among those countries, next to Mexico, China, and Vietnam, that has the biggest trade deficit with the United States, something Donald Trump doesn’t like at all, which is difficult to make up for. And at the same time, Germany’s economy is among the slowest-growing economies in the European Union. It’s stagnating since the pandemic, since Russia’s invasion of Ukraine. And, more importantly, it is stagnating because Germany’s industry is, for years, threatened by cheap, subsidized state competition from China, what some analysts call the China shock 2.0, but which has not fully arrived in Germany yet as a realization that one of the biggest problems that Germany has structurally in its economy is not only the pandemic, Russia, the United States, but it really is the threat to Germany’s industry that is coming from China.

And I think there, from an economic and a trade perspective and a tariff perspective, it will be very difficult for Germany to really focus right and to get the analysis right. What is the long-term structural challenge to Germany’s economy? What is the short-term hit by Donald Trump right now? And shouldn’t we still focus on trying to protect our industry from China, even if there is obviously a strong temptation to use China as a hedge now against Donald Trump? Or to say, well, we can’t afford two trade wars on two fronts, right, which, again, will not help because the China competition, the China challenge still remains there. And it’s actually only grows bigger the more empowered China feels that it can—it can exploit the breakup of the transatlantic alliance. So I think that’s a big challenge for the Germany’s economy, not only the tariffs question but really how to focus on structural problem solving that includes, most importantly, China as a factor.

SOKOL: Mmm hmm. I don’t see any other virtual hands raised. And so I would encourage people to raise your virtual hand and we’ll fold you into the discussion.

But let me sort of pick up on another element of this financial piece that is sort of hotly discussed and hotly contested. And that is whether or not the billions in frozen Russian assets can be used to sort of fill the financial gap on the European side, but now that the U.S. is pulling back in its support I know that there’s been an evolution in the thinking in France and in Germany about this. But I would love to get each of your thoughts on whether or not you think that these frozen Russian assets can actually be used to help fund some of these efforts.

FIX: I can start with that, because I love to be outraged about this. (Laughs.) That these Russian frozen assets have still not been confiscated by the Europeans. There is this model of interests on the loans—of loans on the interests, and so on, which gives Ukraine 15 billion per year. But the latest proposal that we’ve seen where the Europeans seem to converge is to use the Russian frozen assets as a leverage if Russia breaks a ceasefire, that then those confiscated assets will begin. And I do think this entirely overestimates the deterrent effect that confiscating those assets will have for Russia. Russia would love to get those assets back. That would be fantastic. But it’s not too painful for Russia not to have these assets, right? So that really decreases the deterrence value of this proposal.

And seizing those assets now would incredibly increase Europe’s negotiation to position, not only in terms of supporting Ukraine towards Russia, but also towards the United States, because Europeans will have some leverage. And they could say, well, we actually have the money to support Ukraine for the long term, to buy U.S. weapons, and so on. And also, just looking at the timeline, those Russian frozen assets are also—the sanctions on Russian frozen assets also rolled over every six months at the European Council, right? So especially with the situation where Hungary understands itself as being on the same side as with Donald Trump, it would make sense to move fast to securing those assets, instead of risking that Hungary puts those at risk and all the Russian frozen assets go back to Russia.

So the concern that it will destabilize the euro as a—not make the—not make the euro attractive anymore as a reserve currency, I’m not an expert on that. But my colleagues at CFR tell me that this concern—who are experts—tell me that this concern is overstated, especially in a time of an unpredictable Trump presidency and dollar currency. So if Europeans don’t do that and just use it as leverage in a ceasefire, I think it will be one of those historically missed opportunities, in the same category as the fact that Europe still consumes Russian gas and oil and has not sanctioned Russian energy.

SOKOL: Jan, do you have anything to add? Or can I switch the subject a little bit?

TECHAU: No. I’m similarly outraged on this topic. And I have very little to add, except that I think there’s more political will now gravitating towards finally using those assets. We’re not quite there yet, but this fundamental opposition that there used to be on the European side is slowly subsiding.

SOKOL: It seems to be evolving a little bit. So maybe that is a good segue. I plugged one of Liana’s books a little bit earlier, so let me plug one of yours, Jan. In 2017, which feels like it was an eternity ago, you wrote, Führungsmacht Deutschland, where you sort of outlined a new blueprint, if you will, or a blueprint for a new foreign policy for Germany moving forward. And that word, führung, right, means “leadership.” And just today there was a piece in the New York Times about Friedrich Merz. And the opinion piece sort of called into question whether he would have the leadership capabilities to take the country in the direction that it needs to go in, both in terms of domestic policy but also in terms of foreign policy.

And as we start to wrap up, I’d like to come back to the German election, and sort of the presumptive leader, Friedrich Merz. And what each of you have as sort of expectations for him. I happened to be in Germany in January. And he gave a big foreign policy speech at the Körber-Stiftung, where Liana used to work. What struck me about that is that, you know, his basic premise was to build up trust again with Germany’s neighbors, France and Poland. Only later in his speech did he come to the United States and dealing with Trump. Obviously, Trump is front of mind, the U.S. is front of mind after the developments of the last few days. But do you—you know, as—I guess, it would be really interesting to share with us what each of your thoughts are on this new leader for Germany, presumptive leader for Germany, Friedrich Merz, and what to expect from him.

TECHAU: Yeah, thanks, Steve.

SOKOL: You were nodding.

TECHAU: Yeah, no, I’m nodding because the bar has been set very, very high by Friedrich Merz himself. In that speech that you’ve mentioned, which was the most important, you know, foreign policy statement that he did throughout the campaign, which was, you know, by all means an ambitious speech on European affairs, on the bilateral repair work that needed to be done, on Germany as a military player, and so on and so forth. You know, it was a—was a—I mean, it was more ambitious than anything that we’ve heard for Germany in the foreign policy field probably in the last twenty years, more than what Merkel has ever said, more than what Scholz has said—you know, with the one exception of Scholtz’s Zeitenwende speech, that was then not really followed up by any audible leadership on that topic by him personally.

So Merz has set the bar very high, but he is an untested quantity in terms of an executive leader. I mean, he is a very gifted, extremely skillful opposition politician. He did, you know, a better job in rebuilding his devastated party after the ’21 election than most people expected. So he has shown some leadership there. But, you know, whether he can do the same thing in the chancellery, at the international level, and also internally to manage, you know, a fragile coalition, you know, with a coalition partner that is wounded itself but also proud and wants a share of the cake, that requires a different skill set. So that’s very hard to say. We don’t know that yet.

But the level of ambition, the understanding that something really massive needs to happen, you know, the willingness now to turn around the day after the election, when there’s a new reality in the Bundestag, and basically said, you know, forget about the debt brake. I defended it until yesterday. Now there’s a different world. We have to do something else. That’s a turnaround that, you know, some people thought laughable, but it was a token of leadership. It was there. It was a proof. And it’s interesting. This is the one thing that you can already sense in the Brussels context, and also in London where I was last week. You know, he has already changed the chemistry just by being there and formulating these things from Berlin in a way that nobody has ever heard, you know, in living memory almost.

You know, he has already changed the game. As always, you know, when the biggest kind of country promises to exercise leadership, others fall in line. People will orient themselves, you know, especially the smaller countries in Europe, along the lines of those examples. That makes a huge difference. If he, if Merz, can only pull off, like 50 percent of what he’s formulated in that speech, then Germany will already be massively better off. The big question is not just him as a leader, but also, of course, how much the coalition partner will allow it to happen and will grant him in terms of executive power in the international stage. So a couple of big question marks. But I think the starting point has been a pretty ambitious and good one. And fairly promising, certainly by German standards.

SOKOL: Mmm hmm.

FIX: Yeah. So it’s interesting how the perception of Friedrich Merz really has shifted. He was perceived by many of the German public as being sort of out of time, at some point, you know, being like someone who reemerged from the ’80s. Also because his life has been shaped to such a great extent also by Angela Merkel, and by the missed opportunity of becoming chancellor, which he hoped to be instead of Merkel. And now sort of catches up on that opportunity. And that puts his likely chancellorship almost in historical perspective, right? Because he sees himself in line with the big chancellors, right, kind of Adenauer, Helmut Kohl. He definitely wants to be as great of a chancellor as Angela Merkel has been, because he considers she has done many mistakes.

He will not have the same timeframe to become a grand chancellor as Merkel was. He will not be in power for sixteen years. Hut he is, to the extent, lucky, as Helmut Kohl has been lucky, that the historical circumstances demand a lot from him, right, in the same way as the German reunification has suddenly made Helmut Kohl a grand chancellor. So he has the opportunities. He has the historical context, to a greater extent that Olaf Scholz had in 2022. He has the socialization, the upbringing that that can make this work. But it’s really the question—and I agree there with Jan—the question of his character.

And we’ve seen in the last two weeks before the elections the move to accept votes from the AfD, on an anti—or, let’s say, an asylum-restricting motion in the Bundestag, where he seems to have acted in a way which did not give him any strategic benefits. It may not have hugely damaged him, but it also gave no huge benefits. And those are the kind of sudden eruptions, impulsive, my way or the highway approaches that make his people nervous, but which will also not fly in Europe. My way or the highway doesn’t fly with the Social Democrats at home, but it also doesn’t fly in Europe.

SOKOL: Well, CFR is known for stopping on time. There’s a lot more to talk about, but we’re bumping up on the end of our time together. Let me maybe ask each of you for a thirty second response, since our task was also really to provide an analysis of the German election, and we’ve done a little bit of that, but I’d like to leave our viewers and our listeners with the following question: What surprised you about the results of the German election? If each of you has a, you know, two-sentence response to that, I’d love to close with that.

TECHAU: Two surprises for me. One, how reliable the polls were. The polls were, you know, absolutely stable in the run up to the election and turned out to be correct. And second, of course, everybody was surprised how Die Linke, basically that almost-forgotten post-communist party on the left side of the political spectrum, you know, fared a lot better. There’s an interesting shift. There was an interesting shift at the last minute in their favor. And it was one of the more interesting developments in this very rapidly developing German party landscape.

SOKOL: Mmm hmm. Liana, what surprised you?

FIX: So it’s really an early answer there, but the left-wing party is back from the ashes in Germany—(laughs)—and continues to be back from the ashes. It’s a party that has been very friendly to Putin’s Russia, but it’s a party that has been knocked out by a competitor, Sahra Wagenknecht, who has left Die Linke, but has seemed—seemingly is emerging back into the German political landscape. Which is interesting because it gives concerns that, with another grand coalition especially the young generation in Germany, who is more left leaning, might think that they actually don’t have proper alternatives among the centrist parties, because somehow all the centrist parties end up in coalitions and do the same—which I don’t think is true, but which is a concern that this will feed the left and the right wing fringes in Germany.

SOKOL: Mmm hmm. Let me share two surprises that I had. One was that the AfD did not do better. I mean, granted, they doubled their percentage, right, they got 20.8 percent of the vote. But I thought that they might actually do better. But the other thing that really surprised me was the very high voter turnout, the highest turnout since 1987, with over 82 percent of the electorate coming out and voting. And I’m sure that that sort of is a sign that democracy is vibrant in Germany.

Again, as I said, there’s a lot more to talk about. We haven’t even talked about the AfD at all, which I’m sure is a big topic that we could have covered if there hadn’t been the real current events about Ukraine. But I really want to thank both of you, on behalf of both the Council on Foreign Relations and the American Council on Germany, for taking the time to make this call possible. Jan Techau, Liana Fix, herzlichen dank to both of you. This has been a fabulous discussion. And thanks to everybody for tuning in today. Please note that the video and transcript of this session will be available on the CFR website. But I want to just thank everyone for taking the time for this discussion.

TECHAU: Thank you, Steve.

FIX: Thanks so much.

(END)

This is an uncorrected transcript.