Conservative Merz elected German chancellor after initial debacle

By Madeline Chambers and Thomas Seythal

BERLIN (Reuters) -German conservative leader Friedrich Merz was elected chancellor by parliament on Tuesday in a second round of voting after a humiliating and unprecedented defeat on the first attempt, getting his coalition government off to a weak start.

Merz, 69, who led his conservatives to a federal election victory in February and has signed a coalition deal with the centre-left Social Democrats (SPD), won 325 votes, nine more than needed for an absolute majority, in the secret ballot.

He had secured just 310 votes in the first round of voting, meaning at least 18 coalition lawmakers failed to back him.

After the vote, he headed to the nearby Bellevue Palace to be formally nominated by President Frank-Walter Steinmeier. Later, he will return to the historic Reichstag building in the heart of Berlin to take the oath of office to become Germany's 10th chancellor since the end of World War Two.

Merz is under heavy pressure to show German leadership after the implosion last November of outgoing SPD Chancellor Olaf Scholz's three-way coalition left a political vacuum at the heart of Europe even as it faced a myriad of crises.

"People have been asking Germany to lead for a long time, and there is no more space to not heed that call," said Sudha David-Wilp of the German Marshall Fund of the United States.

"Everything that had been undergirding post-war Germany in the past eight decades is no longer the case, whether it be open markets and free trade, whether it be the U.S. security presence in Europe."

A global trade war sparked by U.S. President Donald Trump's sweeping import tariffs is threatening a third year of downturn in Europe's largest economy, which has already had to grapple with the end of cheap Russian gas since Russia's full-scale invasion of Ukraine in 2022 and growing rivalry from China.

Meanwhile, Trump has threatened not to come to the aid of the NATO alliance, prompting even transatlanticist Merz to question the reliability of the United States as a top security ally and urge Europe to improve its ability to defend itself.

The German coalition deal has mapped out plans to revive growth such as reducing a corporate tax and lowering energy prices. It also vows strong support for Ukraine and higher military spending.

EMBARRASSING START

But Merz's failure to win backing for his chancellorship at the first attempt is a first for post-war Germany and an embarrassment for a man who has promised to restore German leadership on the world stage.

"The whole of Europe looked to Berlin today in the hope that Germany would reassert itself as an anchor of stability and a pro-European powerhouse," said Jana Puglierin, head of the Berlin office of the European Council on Foreign Relations think-tank. "That hope has been dashed. With consequences way beyond our borders."

Party insiders said on Monday he would swiftly secure a majority despite grumbling in both coalition parties about cabinet nominations, policy compromises and a huge borrowing package pushed through the old parliament in its final days.

"This shows that the coalition is not united, which could weaken his ability to pursue policies," said Holger Schmieding, Chief Economist at Berenberg in London.

The only winner of Tuesday's debacle is the far-right, anti-establishment Alternative for Germany (AfD), which came second in February and has topped some recent surveys, said Forsa pollster Manfred Guellner.

"Trust in political institutions is being further damaged," he said.

The two coalition parties have lost support since their already dismal performances in February - especially the conservatives, due in part to frustration with Merz's decision to loosen borrowing limits, despite campaign promises of fiscal rectitude.

"The failed vote is clearly a sign that not everyone in the CDU agrees with the fiscal U-turn," said Carsten Brzeski, Global Head of Macro at ING Research.

The abrasive and erratic style of Merz, who has never held government office, has also failed to convince some that he is chancellor material.

"The relationship between the parties will be severely damaged because of this and (it will) exacerbate the conflicts that are already bubbling beneath the surface," said Philipp Koeker, political scientist at the University of Hanover.

(Reporting by Kirsti Knolle, Madeline Chambers, Rene Wagner, Sarah Marsh, Andreas Rinke, Markus Wacket, Thomas Seythal, Thomas Escritt, Holger Hansen, Rachel More, Friederike Heine, Gianluca Semeraro; writing by Sarah Marsh; editing by Matthias Williams and Gareth Jones)