Germany swings to right as Friedrich Merz’s party wins election

Today’s agenda: Ukraine war’s third year; DEI under scrutiny at Apple; Ruchir Sharma on China’s investability; Warren Buffett’s soaring cash pile

Good morning. Hours ago, Friedrich Merz’s Christian Democrats (CDU) and sister party CSU won Germany’s federal elections, with the far-right Alternative for Germany (AfD) clinching its highest-ever vote share to secure second place. Here are the results:

What the results mean: The outcome marks a big swing to the right amid a stagnating economy and rising anti-immigrant sentiment in Germany. The AfD, which has flirted with Nazi-era slogans and called for mass deportations, doubled its vote share from 2021. The results also come at a time of regional upheaval, after US President Donald Trump recently blindsided Europe by holding direct talks with Russia over ending the Ukraine war.

Trump’s administration has openly courted the AfD, which has urged an end to sanctions on Russia. Within hours of polls closing, Merz declared that Germany had to fundamentally remake its security arrangements and achieve “independence” from the US, given Trump was “largely indifferent” to Europe’s fate. Trump has threatened to pull US security guarantees from the continent, while Germany hosts the largest contingent of American troops stationed in Europe.

Looking ahead: Merz now has to lead a potentially complex government and may have little option but to form a coalition with outgoing chancellor Olaf Scholz’s Social Democratic party, which had its worst result since 1887. It remains unclear whether Merz can negotiate a ruling majority strong enough to drive through fundamental reforms, including revisions to a constitutionally enshrined limit on public borrowing. Read more about the German election and its global implications.

• Instant Insight: Expectations for Merz, Germany’s next chancellor, are already sky-high, writes Europe editor Ben Hall, but coalition talks will be tough.

For more analysis on the results, check out our Europe Express newsletter, which was made free-to-read for the German elections. Sign up if you’re a premium subscriber or upgrade your subscription here. And here’s what else we’re keeping tabs on today:

• Ukraine war: A virtual G7 meeting will be held to mark the third year of Russia’s full-scale invasion, while EU foreign ministers meet in Brussels to discuss the conflict. The UK will announce new measures to ban Russian elites from entering Britain and launch new sanctions against Moscow.

• Economic data: The EU reports inflation data and fourth-quarter trade figures with Russia, while Ifo issues its business climate index for Germany.

• Macron visits Trump: The US president hosts his French counterpart at the White House.

• India-UK trade: UK business secretary Jonathan Reynolds is in New Delhi to relaunch negotiations on a long-awaited trade deal.

In the wake of Germany’s pivotal election, can Europe meet its challenges? Join FT experts as they discuss the continent’s future at a subscriber-only webinar on Thursday. Register for free.

Five more top stories

1. Volodymyr Zelenskyy has offered to step down in exchange for lasting peace and Nato membership for Ukraine. His startling offer, while improbable given the dim prospects for Kyiv’s accession to the military alliance, is a sign of extreme pressure on the Ukrainian leader as the US hurries to hatch a peace deal with Moscow. Read the full story.

• Opinion: Now is the time for Europe really to step up on Ukraine, writes Lars Løkke Rasmussen, Denmark’s foreign minister.

• Related: The US has signalled it will maintain a military presence in Poland despite emerging tensions over Ukraine.

2. Spain’s foreign minister has called on the EU to craft its own China policy and not ape the Trump administration’s confrontational stance. In an interview with the Financial Times, José Manuel Albares said the region can have a dialogue with the US, its “natural ally”, but that “Europe must take its own decisions”.

3. Apple’s diversity policies and partnership with OpenAI will come under fire from conservative organisations at its annual meeting, with investors set to vote tomorrow on two shareholder proposals. While the two motions — opposed by Apple — are unlikely to pass, here’s how they could still force the company to respond.

4. Exclusive: The Eurozone risks “sleepwalking” into making too many interest rate cuts and needs to stand ready to stop lowering borrowing costs soon, the head of Belgium’s central bank has said. Read the full FT interview with Pierre Wunsch.

5. Tens of thousands of displaced Palestinians will not be allowed to return to their homes in the occupied West Bank, Israel’s defence minister said, as the country’s military expands its operations. Separately, the Israel-Hamas ceasefire has been thrown into doubt after Prime Minister Benjamin Netanyahu delayed the release of more than 600 Palestinian prisoners. Here’s the latest from the region.

• Nasrallah’s funeral: The veteran Hizbollah leader, who was killed in an Israeli air strike five months ago, was buried yesterday after a ceremony in Beirut attended by huge crowds.

News in-depth

Three years after Russia’s full-scale invasion, Ukraine’s war effort has badly stalled. Trump is pressing for a deal with Russia — while sidelining Kyiv and disparaging Zelenskyy. Now, with the country’s future hanging in the balance, the Ukrainian leader is facing his biggest fear: war without US support.

We’re also reading . . . 

• Syria: Today’s Big Read looks at how the country’s new rulers meet the challenge of forging a national security apparatus from a patchwork of factions.

• Doge vs business: The prospect of deregulation is appealing, but CEOs may come to regret their Faustian bargain with Trump and Elon Musk, writes Rana Foroohar.

• UBS: The bank now finds itself confronted by the prospect of tougher rules in Switzerland than its global rivals, writes Patrick Jenkins.

• Is China investable? It always was, writes Ruchir Sharma — at the right price and for those with eyes wide open.

Chart of the day

Warren Buffett has sought to reassure Berkshire Hathaway shareholders that he still wants to own businesses, despite the group’s cash pile rising to a record after it dumped stocks and failed to make any big acquisitions.

Take a break from the news . . . 

Our latest Life of a Song column explores “Here Comes the Sun” by George Harrison. The 1969 piece lit up The Beatles’ Abbey Road album and spawned hundreds of covers, including versions by Richie Havens and Nina Simone.