Friedrich Merz’s fiscally conservative Christian Democratic Party (CDU/CSU) won Germany’s national election this month,
citing promises of uniting Europe amid challenges from Russia and the US, as well as a coalition with the centre-left Social Democrats to stabilise economic issues. A coalition with right-wing party AfD would also be possible, but Merz has ruled this out after
votes revealed they were the second favourite in Germany.
The CDU’s manifesto includes corporate tax reductions, working time law relaxation, and the eradication of the German Supply
Chain Act, which requires companies to respect human rights and environmental standards. Merz also spoke of lowering energy costs that have burdened businesses since the Ukraine war by returning to nuclear power generation. A new ministry for digitisation
will also be set up to ensure that Germany makes progress in this space.
Susannah Streeter, head of money and markets, Hargreaves Lansdown, says that a “dose of more certainty has been injected into European politics, with the Germany’s Conservatives winning the elections. It comes at a crucial time for the continent. Three years
on from the invasion of Ukraine, high stakes deal making between the US and Russia continues, Ukraine is out in the cold and the outcome will have huge implications for security in Europe.
“There is a dawning realisation that European nations will have to pull together and present a more united deterrent force, and Friedrich Merz, the CDU leader, is reading from that script. He has pledged to relax fiscal rules, to increase defence spending
and inject the economy with much needed investment. But while Merz seems determined to ease off the so-called debt brake, which limits annual borrowing to 0.35% of GDP, it won’t be straightforward, because he will need a two-third majority in parliament.”
What Merz’s win will mean for the fintech industry
Business
Merz is a champion of a free-market economy and has the interests of businesses, particularly large corporations, front of mind. As mentioned, the CDU will focus on reducing bureaucratic hurdles and supporting economic growth, which could mean less regulatory
red tape and more favourable conditions for scaling and innovation. This could in turn encourage investment in fintech startups, industry-driven solutions and job creation.
Regulation
In attempts to maintain Germany’s position as a global financial hub, Merz is expected to balance financial oversight with innovation. What this could mean is a more consistent regulatory framework that helps create a secure operating environment, with fewer
changes.
Transformation
While not as vocal about promoting digital finance in the same way as the Greens, Merz has acknowledged the importance of embracing digital technology to stay competitive. Again, fintech firms may receive more support for digital infrastructure projects,
starting with private sector involvement and market-driven solutions.
Nigel Green, CEO, deVere Group, believes that if “Conservative front-runner Friedrich Merz secures a coalition with the Social Democratic Party and potentially the Greens, investors expect a wave of economic reforms and a possible relaxation of the debt
brake, setting the stage for a sustained bull run.” He continues: “Investors are increasingly looking at Germany as the epicenter of the next European market boom. The election outcome could unlock a level of investment activity that we haven’t seen in years.”
AvaTrade’s chief market analyst, Kate Leaman, offers a similar view. “Markets are already reacting to the CDU/CSU alliance’s electoral victory. German and European stocks are looking at a solid boost. For example, the DAX, Germany’s main stock index, could
see some real momentum, especially in industrials, financials, and defence. Investors are expecting a more business-friendly government, which usually means fewer regulations and policies that help companies grow.”
Under Friedrich Merz’s potential leadership, the fintech industry in Germany could experience a more stable, business-friendly environment with an emphasis on fostering innovation while keeping a watchful eye on regulatory risks. The focus would likely be
on supporting the growth of established fintech companies rather than radical policy shifts. Regulatory clarity, financial stability, and a more market-oriented approach would be the hallmarks of his tenure, providing fintech firms with a secure foundation
for growth.
However, companies seeking rapid progress in digital finance, such as in blockchain, cryptocurrency, or green finance, might find Merz’s more cautious approach to regulation a bit slower compared to other, more progressive political factions. Nonetheless,
the overall impact is likely to be one of steady, sustainable growth in the fintech sector with a focus on maintaining Germany's position as a leading financial and technological hub in Europe.