What’s alt is neu again.

Little more than three years after they were booted from office, Germany’s centrist conservative Christian Democratic Union and its sister party, the Christian Social Union in Bavaria, won the most votes in the country’s federal election Sunday. The outcome leaves CDU leader Friedrich Merz poised to become Germany’s next chancellor, putting him in charge of an economy headed in the falsche Richtung (that’s the wrong direction, not the richtige one).

Take Your Foot Off the Bremse

Rather than make a fool of yourself, in German you make a monkey of yourself (Sich zum Affen machen). And, in a lot of ways, that’s what the German economy has done in recent years. 

Policymakers — including former CDU-led governments — bet the haus on the country’s manufacturing sector’s ability to drive growth through exports. Trade amounts to more than 80% of German GDP, according to World Bank Data. But with China’s emergence as a manufacturing superpower, that exposure has stung. For example, five years ago, China wasn’t a net exporter of cars and, by last year, it shipped out 5 million. At the same time, the net export of German autos — the pride of the country’s storied engineering history — fell by half to 1.2 million, according to the Centre for European Reform.

Energy prices, made worse by the severing of trade ties with Russia over the Ukraine war, have also left manufacturers at a disadvantage. Electricity in Germany costs an average 20.3 euro cents (about $0.21) per kilowatt hour compared to roughly 8.4 euro cents in the US and China, according to a study for the Bavarian Industry Association. And growth in the world’s third-largest economy — which hasn’t topped 2% since 2017 — is “stuck in stagnation,” as outgoing economy minister Robert Habeck put it. The government expects a feeble 0.3% growth rate in 2025 (a more dour independent forecast says to expect a 0.5% contraction). So what will Merz, the likely next chancellor, do?

• First, he has to form a government. The CDU got 28.6% of the vote, placing them ahead of the far-right extremist Alternative für Deutschland in second place at 20.8%. German leaders, including Merz, have pledged not to form a governing coalition with the far right, maintaining a so-called firewall, or Brandmauer. That means he’ll need one or more coalition partners, which could include outgoing Chancellor Olaf Scholz’s Social Democrats or the Greens.
• Politicians have debated whether to change Germany’s Schuldenbremse, or debt brake, a 2009 rule that blocks the deficit from exceeding 0.35% of the country’s GDP. Merz has indicated an openness to relaxing the policy, but not to finance additional welfare spending with debt. Instead, he has hinted that new borrowing could be used to stimulate investment, while campaigning like a traditional conservative on cuts to government spending and calling tax hikes “poison.”

What Do the Markets Think? Germany’s blue chip DAX has hit new highs all month and is up 11% on the year, besting the S&P 500’s 2.5%. Defense stocks have led the gains as the Trump administration has pressured Europe to increase military spending, but firms in several areas — including industrial manufacturing conglomerate Siemens, Deutsche Telekom, and software giant SAP — have also provided a lift. That’s on the promise that a relaxed debt brake could mean more spending on defense, infrastructure, and technology.

Newly-tapped FTC Chairman Andrew Ferguson has done something radical by the standards of an administration determined to repeal and replace what came before on Day One: He’s left things mostly intact. 

While under consideration for appointment by President Donald Trump, Ferguson vowed to end his predecessor Lina Khan’s “war on mergers.” But last week, he announced that the agency would be maintaining the strict merger and acquisition guidelines installed by Khan in 2023 — guidelines that have been reviled by much of Wall Street and Silicon Valley. So what gives?

Let’s Make a Deal

Khan’s 2023 update of the guidelines — the second such revision since 2010 — urged the agency to review how mergers impacted not just consumers or competition, but also all sorts of markets up- and downstream from a deal, such as suppliers and labor. Besides determining when the agency should try to block a deal, the guidelines also help judges presiding over its cases to interpret antitrust case law. And since their introduction, judges have cited them favorably, Daniel Hanley, senior legal analyst at the Open Markets Institute, told The Daily Upside.

While Khan has been lauded by some conservatives, including Vice President JD Vance, the 2023 guidelines have been a headache for business. Influential angel investor Jason Calcanis recently took to X-née-Twitter to say the merger guidelines “killed the VC industry.” Ferguson, for his part, defended the decision on X, saying “stability is important for enforcement agencies and the business community.”

As it turns out, Ferguson’s push for “stability” may not matter one way or the other. January marked one of the slowest months in M&A in a decade, and general uncertainty over Trump 2.0 policy — be it over antitrust, global trade, interest rates, or otherwise — is a major reason why:

• Just 873 mergers or acquisitions were completed in the US in January, a 30% decrease from a year ago and the lowest level for the month since 2015, according to LSEG data seen by the Financial Times.
• By dollar volume, deal activity fell 18% compared with a year ago, according to the LSEG data.

The start of the Trump administration has been “incredibly volatile. Whatever you thought of prior administration policy, it provided a steady and predictable backdrop for markets,” Antonio Weiss, a partner at investment firm SSW, recently told the FT, adding: “That’s been replaced by erratic policy, veering between a so-called business-friendly agenda, and trade disputes, isolationism and generally inflationary policies that cloud the interest-rate outlook.”

Sense & Censorshipability: So will Ferguson maintain Khan’s legacy as an antitrust hawk? Hanley says we’ll know based on how the agency tackles a few ongoing cases — particularly its ongoing claim that wine and spirits distributor Southern Glazer’s has engaged in illegal price discrimination in violation of the rarely enforced Robinson–Patman Act of 1936. In the meantime, Ferguson has signalled that he will likely rescind a Khan-era rule banning virtually all non-compete agreements in the US. And on Friday, he launched a new inquiry that may offer a glimpse into what’s holding his attention the most: whether Big Tech platforms banning users constitutes censorship in violation of antitrust law.

The metaverse can be a lonely place.

Figures from consultancy AppFigures, reported by CNBC on Friday, show that Apple’s mixed reality headset Vision Pro is losing developers. Developers for augmented reality or virtual reality or whatever-reality-you-want-to-live-in headsets translate to apps, and without them, there’s really nothing for you to do in the metaverse. Imagine an iPhone with no apps — isn’t that terrible? Or wait, is that just a telephone?

A Lack of Visionaries

According to AppFigures, there are currently 1,900 apps on the Vision Pro, which costs an eye-watering (and potentially eyeball-straining) $3,500. Apple said in August that it had 2,500 apps on the platform, so somewhere along the way, it has shed just under 25% of the apps it had six months ago.

The Vision Pro’s first year on the market — it went on sale in February last year — has not been a roaring success. Its high, high price point along with its fairly niche selling proposition as a productivity tool, rather than a gaming headset, meant Apple had to scale back its ambitions:

• According to a report from analyst Ming-Chi Kuo last year, Apple originally set a first-year sales target of 800,000 units for the Vision Pro but later slashed that number to 450,000.
• In October, The Information reported that Apple was significantly scaling back production of the headset, and that it was pressing pause on developing a next-generation headset to instead focus on making a cheaper version of Vision Pro.

Don’t Mess with Meta: For developers, the weak Vision Pro uptake is a reason to build apps for competing headsets that have more users, like Meta’s Quest VR models (formerly known as Oculus). An internal Meta memo seen by Business Insider said that Reality Labs, the wing of the company responsible for hardware including the Quest headsets, exceeded most of its sales and user expectations for 2024, notching 40% sales growth.