Executive Summary
On January 22, 2026, Chancellor Friedrich Merz addressed the World Economic Forum in Davos at a moment of acute systemic stress in the international order. Framing the global environment as a return to a brutal era of “great power politics,” Merz sought to position Germany as a newly awakened strategic actor—clear-eyed, realistic, and finally emancipated from the illusions of post-Cold War economic pacifism. Yet rather than consolidating this image, the speech exposed persistent internal contradictions in Germany’s evolving foreign policy doctrine.
Viewed through a Bayesian learning framework, Merz’s address reveals a pattern of asymmetric belief updating: German threat perceptions adjust rapidly when economic costs are immediate or domestic political pressure intensifies, but update only sluggishly—and often selectively—when long-term strategic risks threaten core alliance interests. The result is a form of reactive realism that mimics strategic adaptation without fully internalizing its implications.
Merz’s continued tendency to privilege short-term trade exposure—most notably vis-à-vis China—over durable security commitments, combined with his improvisational and occasionally inflammatory diplomatic rhetoric, has exacerbated doubts within both the G7 and the European Union regarding Berlin’s reliability as a stabilizing anchor. Rather than resolving the credibility deficit that has plagued Germany since the onset of the Ukraine war and the collapse of its energy model, the Davos speech unintentionally reinforced perceptions of a country still caught between moral posturing, economic dependency, and strategic hesitation.
I. Historical Context: Germany’s Perpetual Crossroads
Germany’s current strategic disorientation is not the product of a single policy failure, but the cumulative outcome of more than a decade of overlapping structural shocks that have eroded the foundations of its post-World War II identity as a Zivilmacht—a civilian power whose influence derived from economic weight, normative legitimacy, and institutional multilateralism rather than coercive capability.
The socio-economic dimension of this crisis remains unresolved. The 2022 energy shock, triggered by the abrupt severing of Russian gas supplies, initiated a prolonged period of industrial contraction that extended through 2023 and 2024. While outright collapse was avoided through massive fiscal intervention, the underlying pathologies persist into 2026. German industry continues to suffer from structurally elevated energy costs relative to both the United States and East Asia, accelerating capital flight in energy-intensive sectors such as chemicals, metallurgy, and advanced manufacturing. Simultaneously, demographic decline and a shrinking working-age population have tightened labor markets while suppressing productivity growth, further constraining Germany’s long-term growth potential.
These pressures have collided with an unresolved domestic political struggle over the constitutional Schuldenbremse (debt brake). Despite growing consensus among economists and defense planners that large-scale public investment is unavoidable—particularly in energy infrastructure, defense procurement, and digital modernization—Germany remains institutionally locked into fiscal orthodoxy. The resulting policy paralysis has left Berlin attempting to project strategic ambition abroad while lacking the fiscal instruments to sustain it at home.
Geopolitically, Germany remains in a prolonged phase of strategic relearning following the Zeitenwende declared in 2022. The abandonment of Russian energy dependence was swift but costly; the disentanglement from Chinese markets has been slower, more hesitant, and far more politically contested. Under Angela Merkel, Germany’s external posture was defined by consensus-driven incrementalism—often criticized, but predictable. Under Merz, this has given way to a more confrontational rhetorical style branded as “conservative realism,” yet one that remains operationally inconsistent.
Allies have increasingly struggled to reconcile Berlin’s declaratory commitments with its revealed preferences. Germany speaks the language of strategic autonomy and deterrence, yet continues to behave as a deeply risk-averse trading state. This divergence has not gone unnoticed in Washington, Paris, Warsaw, or the Nordic capitals, particularly as Europe enters an era where security externalities can no longer be outsourced indefinitely to the United States.
II. Critical Analysis of the Davos Speech: Inconsistency as Strategy Failure
Chancellor Merz’s Davos appearance distilled these tensions into a single performance marked by rhetorical assertiveness but analytical selectivity. Rather than clarifying Germany’s strategic priorities, the speech underscored a recurring pattern of belief inconsistency, where moral language and threat identification fluctuate according to economic exposure and domestic political convenience. This dynamic undermines alliance trust precisely at a moment when credibility, not capacity alone, is the binding constraint on Western deterrence.
The China–Greenland Blind Spot
Most striking was Merz’s treatment of the Arctic and Greenland. While he correctly identified Russia as a central destabilizing force in the High North, his pointed omission of China’s expanding Arctic ambitions was conspicuous. By 2026, Beijing’s self-designation as a “Near-Arctic State” is no longer rhetorical posturing but an operational reality, manifested through dual-use infrastructure investments, satellite coverage expansion, and deepening scientific-military integration across the polar corridor.
Merz’s silence on this dimension cannot be plausibly attributed to analytical oversight. Rather, it reflects a calculated effort to insulate Germany’s export-dependent industrial base—particularly automotive, machinery, and chemicals—from Chinese retaliation at a time when domestic economic fragility leaves Berlin acutely vulnerable. From a Bayesian perspective, Germany appears to heavily discount low-probability, high-impact security risks when immediate economic costs are salient, resulting in systematically biased threat assessment.
The signal sent to allies is deeply problematic. By selectively acknowledging threats in the Arctic, Berlin implicitly communicates a willingness to tolerate strategic exposure along NATO’s northern flank in exchange for short-term commercial stability. This perception is especially corrosive for Nordic and Baltic states, for whom Arctic security is not abstract but existential. In attempting to preserve economic optionality, Germany instead amplifies doubts about its strategic resolve.
NATO Budget Revisionism and Reactive Leadership
Merz’s assertion that Germany’s commitment to a 5% GDP defense spending target constitutes evidence of proactive leadership further strained credibility. While it is true that Berlin has formally endorsed the target, the political genealogy of the decision tells a different story. The benchmark originated not from European strategic planning but from sustained pressure by President Donald Trump, crystallized at the 2025 Hague Summit, where U.S. officials explicitly linked continued American security guarantees to measurable European burden-sharing.
Merz’s initial response to the proposal was ambivalent at best. Only after Washington escalated its rhetoric—most notably through explicit warnings regarding Greenland’s strategic vulnerability and the limits of automatic U.S. protection—did Berlin recalibrate. The subsequent pivot was rapid, but it was also unmistakably reactive. Attempts to retroactively frame the decision as a German-led strategic awakening have been met with quiet skepticism among allies, who increasingly distinguish between adaptation under duress and genuine leadership.
In Bayesian terms, Germany updated its priors only after the cost of inaction became unavoidably visible. While rational at the margin, such delayed updating reduces Germany’s value as a first mover within alliance dynamics and reinforces the perception that Berlin responds to shocks rather than shaping outcomes.
The “Dirty Work” Gaffe and Normative Erosion
Merz’s reaffirmation of his earlier characterization of Israeli military action against Iranian nuclear facilities as “dirty work” for the West represents perhaps the most damaging element of the Davos address. The phrase is not merely inelegant; it reveals a deeper normative inconsistency at the heart of German strategic discourse.
By framing kinetic military action as morally contaminating labor outsourced to allies, Germany implicitly positions itself as a beneficiary of security outcomes without full ownership of their ethical or material costs. This language clashes sharply with Berlin’s professed commitment to international law, multilateral responsibility, and the indivisibility of security burdens. It also resonates poorly beyond the Atlantic community, reinforcing perceptions in the Global South that Western norms are selectively applied and rhetorically instrumentalized.
From a learning perspective, this episode illustrates Germany’s failure to update its diplomatic language to match its altered strategic environment. In an era where narratives matter as much as capabilities, rhetorical missteps carry real alignment costs. Rather than clarifying Germany’s stance, the remark entrenched ambiguity and alienation simultaneously.
Taken together, the Davos speech did not merely fall short of its ambitions; it actively revealed the limits of Germany’s current strategic learning process. The challenge for Berlin is no longer one of awareness, but of consistency—aligning economic policy, security commitments, and diplomatic language within a coherent belief system that allies can trust. Without such alignment, Germany risks remaining perpetually at the crossroads it so frequently invokes, adapting just enough to avoid crisis, but never enough to shape the order it claims to defend.
III. Global Relations and Strategic Difficulties
Germany’s strategic incoherence is most visible not in abstract doctrine, but in the cumulative friction it now generates across nearly every major bilateral and regional relationship. Rather than acting as a stabilizing hub within the international system, Berlin increasingly functions as a reactive node, adjusting positions piecemeal in response to pressure while failing to converge on a coherent belief set that allies and partners can reliably model. This erosion of predictability is particularly damaging in an era defined by alliance management and coordinated deterrence.
Relations with France illustrate the depth of this dysfunction. The Franco-German axis, long portrayed as the engine of European integration, has entered its most strained phase since the early 1960s. Beneath surface-level cooperation lies a widening conceptual divide over sovereignty, fiscal policy, and strategic autonomy. Paris views Merz’s posture—especially his rapid alignment with U.S. defense demands under the Trump administration—as a form of renewed “Atlantic vassalage,” one that undermines the European capacity to act independently of Washington’s electoral volatility.
The conflict over EU fiscal rules is emblematic. France has pushed aggressively for a permanent relaxation of post-pandemic budget constraints to enable large-scale industrial and defense investment. Germany, constrained by its constitutional debt brake and domestic political orthodoxy, has resisted structural reform while simultaneously endorsing ambitious military targets it lacks the fiscal flexibility to sustain. From Paris’s perspective, this amounts to strategic free-riding in reverse: Germany demands European discipline while outsourcing political risk to others. The result is a hollowed partnership, where symbolic coordination masks substantive divergence.
In Central Europe, historical memory and present-day incentives interact in destabilizing ways. Poland remains deeply wary of German intentions, shaped not only by twentieth-century trauma but by Berlin’s more recent ambivalence toward Russia prior to 2022. Despite improved military cooperation, Warsaw continues to interpret German caution as latent unreliability. Merz’s rhetorical assertiveness has done little to alter this perception, particularly when not matched by consistent action.
Hungary presents a different, but equally revealing, challenge. Prime Minister Viktor Orbán has adeptly exploited Merz’s transactional instincts, leveraging Germany’s desire for EU unity to extract concessions while maintaining close ties with both Moscow and Beijing. The dynamic exposes a core weakness in Germany’s current approach: by emphasizing deal-making over rule enforcement, Berlin unintentionally incentivizes illiberal actors to treat European norms as bargaining chips rather than binding commitments.
Nowhere is Germany’s belief inconsistency more pronounced than in its relations with China and India. Officially, Berlin has embraced the language of “de-risking,” acknowledging the strategic vulnerability inherent in deep economic dependence on an authoritarian great power. In practice, however, China remains Germany’s single most important trading partner, and industrial lobbies continue to exert decisive influence over policy calibration. Each incremental escalation in U.S.-China rivalry forces Berlin into increasingly strained rhetorical contortions—affirming transatlantic solidarity while quietly lobbying against measures that would meaningfully disrupt Sino-German commerce.
India, by contrast, represents a strategic opportunity Germany has repeatedly failed to operationalize. Despite shared interests in supply-chain diversification, maritime security, and technological cooperation, Berlin’s engagement with New Delhi remains episodic and under-resourced. This reflects not hostility, but institutional inertia: Germany’s foreign economic apparatus remains optimized for established markets rather than emerging strategic partnerships. In Bayesian terms, Germany overweights familiar priors even as the underlying probability distribution of global power shifts decisively.
Germany’s standing in the Arab world has deteriorated sharply following Merz’s “dirty work” remarks. Historically, Berlin cultivated a reputation as a comparatively neutral interlocutor in the Middle East—less encumbered by colonial legacies or overt military interventionism. That reputational capital has now been significantly depleted. By framing regional conflict in instrumental terms, Germany undermined its ability to act as a credible mediator, particularly in a context where moral language is closely scrutinized. Arab governments increasingly view Berlin as normatively inconsistent: rhetorically committed to international law, yet selectively dismissive of its application.
Latin America offers a final, instructive case. Germany’s influence in the region has declined precipitously over the past five years, a trend starkly illustrated by the record-low attendance at high-profile summits such as Santa Marta. While Berlin continues to emphasize values-based diplomacy, it has failed to compete with China’s infrastructure-driven engagement model. Beijing’s rapid expansion of trade, investment, and political presence has effectively displaced Germany as a meaningful economic partner across much of the continent. The lesson is not merely about resources, but about strategic prioritization: Germany’s global ambitions remain misaligned with its willingness to invest political and economic capital where influence is actively contested.
IV. Five-Year Scenario Analysis (2026–2031)
Projecting Germany’s trajectory over the next five years requires explicit acknowledgment of uncertainty and path dependence. A Bayesian framework is particularly instructive here, as each scenario reflects not only structural constraints but the likelihood that Berlin meaningfully updates its priors in response to accumulating evidence. The probabilities assigned are not forecasts in a deterministic sense, but conditional assessments based on current belief patterns and institutional inertia.
The most probable outcome is a continuation of the present trajectory: Germany as a de facto “vassal state,” albeit an affluent and formally sovereign one. In this scenario, Berlin fails to achieve genuine strategic autonomy, instead aligning closely with U.S. defense priorities under continued pressure from the Trump administration. Defense spending rises to meet externally imposed benchmarks, but without corresponding political ownership or strategic initiative. Simultaneously, China leverages Germany’s export dependence to shape trade outcomes, constraining Berlin’s freedom of maneuver. The European Union, lacking decisive leadership, fragments into a loose constellation of middle powers—coordinated enough to avoid collapse, but insufficiently unified to shape the global order.
A second, closely related scenario envisions Germany as a “hollow hegemon.” Here, Berlin meets its formal commitments, including the 5% GDP defense target, yet remains reluctant to deploy military power or assume operational leadership. The result is a paradoxical condition: unprecedented investment without corresponding strategic effect. Economic stagnation persists as firms relocate production to jurisdictions with cheaper energy and clearer industrial policy, particularly the United States and parts of East Asia. Merz’s improvisational foreign policy style deepens mistrust with France, transforming the Franco-German partnership from a strained engine into a structural liability for European cohesion.
The least likely, but most transformative, scenario is one of strategic rebirth. This outcome requires a decisive break with entrenched fiscal orthodoxy, including a substantive reform of the debt brake to enable sustained public investment. Such reform would allow Germany to pursue a dual strategy: rebuilding credible military capacity while accelerating green and digital industrial transformation. Crucially, this scenario also depends on Germany internalizing the lesson that strategic autonomy is relational, not unilateral. By genuinely integrating its security posture with Poland and France, Berlin could help construct a resilient European pillar within NATO—capable of complementing, rather than depending upon, the United States, and insulated from the volatility of American electoral cycles.
Whether Germany converges toward this outcome hinges less on external shocks than on its capacity for internal belief revision. The evidence to date suggests that learning remains partial, reactive, and uneven. Until Germany aligns its economic model, fiscal architecture, and strategic rhetoric within a coherent probabilistic framework, it will continue to oscillate between ambition and hesitation—aware of the stakes, yet unwilling to fully act upon them.
V. Policy Recommendations for G7 Partners: Managing Germany as a Conditional Ally
For G7 partners, the central policy challenge posed by Chancellor Merz’s Germany is not hostility, but strategic volatility. Berlin is neither revisionist nor disengaged; it is a pivotal middle power struggling to reconcile economic vulnerability with security responsibility. As such, G7 governments should approach Merz’s rhetoric with guarded pragmatism, distinguishing between declaratory alignment and revealed preferences, and calibrating engagement accordingly.
Germany’s formal commitment to elevated defense spending, including acceptance of the 5% GDP benchmark, represents a meaningful—if belated—shift and should be acknowledged as such. However, G7 partners must resist the temptation to treat budgetary commitments as sufficient proxies for strategic reliability. The deeper issue is not Germany’s capacity, but its decision-making consistency under pressure. As the Davos address demonstrated, Berlin continues to update its strategic beliefs unevenly across domains, responding forcefully to U.S. pressure on defense while remaining conspicuously cautious where Chinese economic leverage is involved.
A unified G7 posture is therefore essential to shape Germany’s learning process. Fragmented or bilateral engagement allows Berlin to compartmentalize pressure—absorbing security demands from Washington while quietly lobbying European partners to dilute trade-related measures affecting China. Coordinated signaling across the G7, particularly on supply-chain resilience, export controls, and strategic infrastructure protection, would reduce Germany’s ability to arbitrage between alliance commitments and commercial interests. The objective is not coercion, but belief convergence: making the long-term costs of strategic ambiguity sufficiently salient that Germany updates its priors in a more symmetric and durable manner.
Language discipline must also be addressed explicitly. Merz’s improvisational and occasionally incendiary rhetoric—exemplified by the “dirty work” formulation—carries alliance-wide reputational costs. G7 partners should privately but firmly communicate that such framing undermines collective legitimacy, particularly in engagements with the Global South. Germany’s historical credibility as a normative actor remains an asset, but it is rapidly depreciating. Reputational erosion, once internalized by external audiences, is difficult to reverse. Coordinated diplomatic feedback can function as a corrective signal, reinforcing the linkage between responsible language and sustained influence.
Finally, G7 governments should prepare for the contingency that Germany drifts toward a more transactional, interest-maximizing posture—a de facto “Germany First” orientation—if internal economic pressures intensify. This does not require preemptive decoupling, but it does argue for redundancy: diversified leadership structures within NATO and the EU, deeper security integration among willing partners, and reduced overreliance on Berlin as the default European coordinator. In Bayesian terms, G7 strategy should hedge against the non-trivial probability that Germany’s learning remains incomplete.
Conclusion: Germany’s Incomplete Learning Curve
Chancellor Friedrich Merz’s Davos address was not a diplomatic misstep in isolation, but a revealing data point in Germany’s ongoing strategic adjustment. Through a Bayesian lens, Germany emerges as a state that has acknowledged the collapse of the post-Cold War equilibrium but has not yet fully internalized the distributional consequences of the new one. Its priors have shifted, but not coherently; its updates are reactive, domain-specific, and frequently overridden by short-term economic considerations.
Germany today occupies a structurally pivotal position in the international system. It possesses the economic mass, institutional influence, and historical legitimacy to act as a stabilizing force within Europe and the wider transatlantic alliance. Yet these advantages are being offset by internal contradictions: fiscal rigidity paired with expansive commitments, moral rhetoric paired with instrumental language, and strategic ambition constrained by commercial dependence. The result is not strategic failure, but strategic indecision—a condition arguably more destabilizing in an era of great-power competition.
The scenarios outlined in this analysis suggest that Germany’s most likely future is one of constrained alignment rather than autonomous leadership. Absent a decisive internal recalibration—particularly regarding fiscal policy and China risk exposure—Berlin will remain vulnerable to external pressure and prone to delayed adaptation. Strategic rebirth remains possible, but it requires not only policy reform, but a deeper cognitive shift: acceptance that economic security, military credibility, and diplomatic coherence are no longer separable domains.
For G7 partners, the implication is clear. Germany should neither be dismissed nor indulged. It must be engaged as a conditional ally, supported where commitments are credible and constrained where ambiguity threatens collective interests. In doing so, the G7 can help shape Germany’s learning trajectory, nudging it toward a more integrated and anticipatory form of realism.
Whether Berlin ultimately becomes a stabilizing pillar of the emerging order or a cautious follower within it will depend less on external shocks than on its willingness to complete the learning process it has already begun. The evidence as of early 2026 suggests that this process remains unfinished—but not irreversibly so.
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