Germany's Merz elected chancellor in second parliamentary vote after unexpected setback

Friedrich Merz was elected as Germany's chancellor in a second-round parliamentary vote on Tuesday, after failing to secure the necessary support earlier in the day.

Merz needed at least 316 of the 630 members of parliament to vote in his favor. He received 325 votes.

In the previous vote, only 310 Bundestag members voted for Merz to become chancellor in a highly unexpected and unprecedented setback. Hours of uncertainty then followed as it was unclear when a second vote would take place, and what the outcome would be.

Following the successful vote, Merz was officially appointed chancellor by German President Frank-Walter Steinmeier on Tuesday afternoon.

The German Dax stock market index pared losses after the result of the second vote. It was 0.4% lower by 3:22 p.m. London time.

Merz had been widely expected to become the leader of Europe's largest economy following Germany's federal election in February. His party, the center-right Christian Democratic Union, with its affiliate the Christian Social Union, secured the biggest share of votes at the time.

They are expected to form a coalition government with the center-left Social Democratic Party, which placed third in the election.

The parties on Monday formally signed their coalition agreement following weeks of negotiations that began soon after the election. The agreement outlines plans for policies including migration, changes to tax rules for individuals and businesses, and social security measures such as the minimum wage.

The CDU-CSU/SPD coalition has already announced the picks for their new cabinet. It is set to include designated Vice Chancellor and Finance Minister Lars Klingbeil, incoming Economy Minister Katherina Reiche and designated Foreign Minister Johann Wadephul.

Germany's new chancellor, now 69, has spent his life between politics and business.

After school, he studied law and worked as both a judge and lawyer. His has also held senior positions at various major corporations, including BlackRock Germany, and served on the boards of EY Germany and the Deutsche Börse.

His CDU affiliation began when he was still in school, Merz has said. He got involved in the party's youth organization and eventually represented the party in the European Parliament before joining the Bundestag.

In the early 2000s, much of his political career was marked by a rivalry with former CDU Chancellor Angela Merkel. Her rise through the ranks has been linked to Merz taking a step back from politics for several years.

He will now take over Germany's leadership at a precarious time for the country, which is grappling with a sluggish, stagnating economy, internal tensions around migration, tensions with the U.S. over trade policy and geopolitical challenges such as the Russia-Ukraine war.

Expectations are also high due to the recent fiscal package that stemmed from the CDU-CSU/SPD coalition negotiations. It included changes to long-standing debt rules, as well as a major investment fund targeting infrastructure and climate.

This was a "strong and impressive start" for the new government, but "unfortunately, what has since followed has been a series of slip-ups and sometimes clumsy political moves," Carsten Brzeski, ING's global head of macro said in a note Tuesday.

"Looking ahead, today's events are a painful reminder that it will be hard for the incoming government to fulfil the high expectations regarding investments and reforms," he added. "Friedrich Merz and his government now face the monumental challenge of restoring economic strength while keeping everyone in their own parties aligned."