Report highlights potential risks of social fragmentation under the next government

The 2010s were often described as a ‘golden age’ for Germany. Former Chancellor Angela Merkel was widely lauded for her leadership, overseeing a booming economy, welcoming refugees fleeing war and oppression, and committing to renewable energy. However, recent years have revealed cracks in this image. Rising energy prices, economic stagnation, and political instability have exposed vulnerabilities in Germany’s governance model.

Now, a new report based on the Berggruen Governance Index warns that these divisions could deepen further following this month’s election. The “2024 Berggruen Governance Index: Germany 2025” highlights key structural issues that have been festering for years and suggests that a CDU-led government under Friedrich Merz might struggle – or even fail – to address them effectively.

The report was co-authored by Hertie School Senior Professor of Sociology Helmut Anheier, Research Associate Edward L. Knudsen and UCLA-based Joseph C. Saraceno. It is a collaboration between the Hertie School, the UCLA Luskin School of Public Affairs and the Berggruen Institute in California.

“Merkel era complacency”

To many, Germany’s current political and societal crisis has come as a shock. However, the report suggests that long-standing structural problems have gone unaddressed for years. The Berggruen Governance Index, which evaluates countries on democratic accountability, state capacity and the provision of public goods, shows that while Germany still scores high, its numbers have been in steady decline.

The report identifies four major drivers behind this downturn:

1. Lack of infrastructure investment – Years of underinvestment have left Germany’s public transport, digital infrastructure, and energy sector lagging behind other advanced economies.

2. Perceived failure to integrate migrants – While immigration has been economically necessary, political rhetoric and social tensions have created a climate of division and resentment.

3. Economic vulnerabilities – Germany’s dependence on exports to China and its reliance on Russian energy have made it susceptible to external shocks.

4. Recent economic downturn – The post-pandemic recovery has been sluggish, and inflationary pressures following Russia’s invasion of Ukraine have further strained economic confidence.

The report argues that Germany’s governance has become increasingly ineffective in addressing these challenges. The complacency of the Merkel era – where Germany avoided difficult structural reforms – has now left the country unprepared for the crises of the 2020s.

The end of stability?

With the federal election approaching, the report calls for major reforms across German governance, including a decisive shift away from low-investment policies. Yet the political landscape suggests a turbulent path ahead. While widespread dissatisfaction with the traffic light coalition led by the social democratic SPD has created an opening for a CDU-led government under Friedrich Merz, the report warns that Merz’s policies may not resolve existing challenges and could instead deepen divisions.

Additionally, his party’s shift to the right raises concerns that social tensions could escalate, particularly regarding immigration and economic inequality.

The path forward

The report’s findings underscore the need for proactive governance and bold reforms to prevent Germany from slipping further into economic and political uncertainty. The new government will need to navigate a complex landscape of public discontent, economic recovery, and geopolitical instability.

Ultimately, the direction Germany takes will depend on the willingness of its leaders to break from the past and address deep-seated structural issues. Whether a CDU-led government under Merz can rise to this challenge remains to be seen.

Read the 2024 Berggruen Governance Index: Germany 2025.

The Hertie School is not responsible for any content linked or referred to from these pages. Views expressed by the author/interviewee may not necessarily reflect the views and values of the Hertie School.