Merz Reshuffles Government as Germany Faces Crises

Friedrich Merz used Germany’s summer lull to rearrange power. Jens Spahn’s resignation over a surrogacy scandal sent Nina Warken to the Chancellery, Thorsten Frei to the leadership of the CDU/CSU parliamentary group, Carsten Linnemann to the Health Ministry and Philipp Amthor into a federal-state role. The chancellor presented the reshuffle as a reset before September elections. By the end of the week, events had made it look like a smaller answer to a much larger problem.

The attack on Berlin’s Pride celebrations was the starkest example. Abdul Ballout, a 21-year-old German citizen with Lebanese roots, drove a van into a crowd in Tiergarten and then attacked people with a blade, killing one woman and injuring 29. He was already known to the Islamist scene, had attempted to reach ISIS territory and in May received a suspended youth sentence of one year and ten months for preparing a serious violent crime. He had been classified as dangerous, partially monitored and sent to a deradicalisation programme. Police killed him after a search lasting nearly a day.

That record turns the case into more than a familiar argument over border control. Germany’s institutions had identified the individual, prosecuted him, monitored him and still failed to contain the risk. Chancellor Merz called the assault an attack on society; Berlin police officer Ali Darwich, a gay Muslim, described it as touching every part of who he was. The political consequence will arrive quickly because Berlin, Saxony-Anhalt and Mecklenburg-Vorpommern vote in September. The AfD is already leading in the east, and security failure gives it a cleaner message than anything Merz can manufacture through cabinet appointments.

The economic numbers carry a quieter warning about state capacity. The Economy Ministry, citing the IWH insolvency trend, recorded 1,702 company failures in June, up 12.1% from May and 20.3% from a year earlier. IWH counted 18,368 partnership and corporate insolvencies over the year to June, an 8.8% annual increase, and expects the third quarter to remain above 2025 levels. The Federation of German Industries says about 15,000 industrial jobs are disappearing each month as US tariffs, Chinese competition and high domestic costs hit manufacturers. Volkswagen, ZF and Bosch have announced cuts. A modest rise in output does not erase the structural squeeze.

That is why Michael Kretschmer’s challenge to the CDU firewall matters. The Saxony premier said politicians who still talk about a firewall against the AfD have missed the signs of the times, even as Merz again ruled out cooperation. An Allensbach poll placed the CDU at 24%, while the AfD could win outright in Saxony-Anhalt. Employers warn that an anti-EU, pro-Russian state government would repel investment; voters facing plant closures may hear that warning as another defence of a system that is not working for them.

Russia supplied a third test of institutional judgment. Die Zeit and ARD disclosed meetings in Baku involving former Merkel chief of staff Ronald Pofalla, former Brandenburg premier Matthias Platzeck and Putin-linked figures including Gazprom chair Viktor Zubkov. German intelligence views the channel as a possible influence operation. Five days after the contacts became public, Berlin approved French production of Russian-designed nuclear fuel at Lingen using Rosatom technology, even though German atomic law permits refusal on security grounds and Westinghouse fuel is an alternative. Merz said he did not know about the latest Baku trip. That may be true; it is not reassuring.

Germany ends the week with a new chief of staff but the same unresolved choices: whether a known extremist can be managed before he attacks, whether an industrial model can adapt before firms fail, and whether dialogue with Moscow is diplomacy or leverage for Moscow. The September elections will judge the answers, not the reshuffle.