Olaf Scholz has been voted in on Wednesday, as the new German chancellor by lawmakers marking the end of Angela Merkel’s 16 years in power.

Scholz is a member of the center-left SPD party. He will be leading a three-party coalition with the Greens and the pro-business FDP party.

The coalition deal has stood out from previous plans owing to an intention to ramp up investment across the country. The pandemic is expected to be their first priority as the new government takes the helm as Germany grapples with high Covid-19 infections and a somewhat stalled vaccination program.

Merkel was first elected as chancellor in 2005. She received a standing ovation at the German Parliament on Wednesday, during her last moment in the Bundestag as a leader.

Chief economist at Berenberg, Holger Schmieding said in a note, “She presided over a long period of peace and prosperity, steering Germany calmly and confidently through a series of upheavals and crises”.

In Germany Merkel’s tenure will be remembered for an improvement in living standards, higher employment rates, and a conservative fiscal stance that allowed government buffers to be built up.

Internationally, Merkel will always be known for her open-door policy during the start of the migration crisis in Europe in 2015. This move influenced not only the wider European discourse on how to deal with the crisis but also shaped anti-immigration rhetoric in multiple nations.

Furthermore, her leadership was also marked by the 2008 financial crisis and the 2011 sovereign debt crisis. Although critics argue Merkel was too tough in pushing austerity policies in the eurozone, supporters on the other hand argue that this was the only way she could have saved the euro and received backing from the German Parliament and electorate.

Otto Fricke, a member of the Bundestag for the FDP, told CNBC’s “Squawk Box Europe” on Wednesday that the last few years of Merkel’s reign showed a lack of progress. He said, “This progress [now] needs to be done”.

Another key challenge for the new government will be geopolitics. In particular, a US warning of a potential invasion of Ukraine by Russia, but also its relationship with Beijing.

“Angela Merkel has been a very constant manager in terms of balancing the commercial interests of Germany with the foreign policy and security pillars of a strong transatlantic relationship and a strong relationship with the EU,” Sudha David-Wilp, deputy director of the Berlin office of the German Marshall Fund of the United States, told CNBC’s “Street Signs Europe.”

She added that this has been important “because many partners have called Germany out for its relations with China and Russia.”


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