German Chancellor Friedrich Merz has warned that the Iran war poses a growing challenge for the German and European economy, while raising alarm over the far-reaching consequences a collapse of the Iranian state could have for Europe's security, energy supply and migration. Merz made the remarks on Friday at the Internationale Handwerksmesse trade fair in Munich, following talks with representatives of major German business associations.
"If the conflict remains limited in time, the impact should remain contained," Merz said. However, he cautioned that "with increasing duration and further escalation of the fighting, we see growing risks." These risks, he warned, concern "the security of Israel and the entire Gulf region" but also "the statehood and territorial integrity of Iran."
Merz had earlier taken part in the traditional summit meeting between the German government and the presidents of key business associations before joining a tour of the trade fair. At the subsequent press conference, the president of the Central Association of German Crafts (ZDH), Jörg Dittrich, described the current situation as a "new normal" of "crises that follow one after another." He warned that this meant "the pressure for reform on Germany as a business location has increased once again."
Dittrich called for "self-sustaining growth" that does not rely solely on state spending, noting that pressure across industry, the Mittelstand and the crafts sector was "immense." He also pointed to divisions within the governing coalition, saying: "The SPD, CDU and CSU have a majority in the Bundestag but are obviously sometimes not agreed on which path to take."
The business associations ZDH, BDA, BDI and DIHK are calling for a range of reforms including a pension reform that raises the retirement age and abolishes early retirement incentives, lower energy costs, faster progress on cutting bureaucracy and lower taxes.
Beyond the economic impact, Merz used his appearance in Munich to issue a stark warning about the geopolitical consequences of the Iran war. He spoke of the dangers of a "possible collapse of Iranian statehood or proxy conflicts fought on Iranian soil," saying these scenarios would have "far-reaching consequences" for Europe, including for security, energy supply and migration.
"A permanent continuation of this war would not be in our interest," Merz said clearly. He added that the federal government was working "with our European partners and also with partners in the region to formulate a common perspective for ending these hostilities and to contribute to its implementation."
Despite his warnings, Merz reaffirmed that he continues to share the goals of the United States and Israel in the conflict. He specifically named the threat posed by "Iran's nuclear and missile programme, as well as Tehran's threat to Israel and its neighbours, the support of terrorism and the so-called proxies in the region."
"Iran's military nuclear programme and its ballistic missile programme must be verifiably ended," Merz stated. He also demanded that "Iran must stop supporting terror networks and proxies" and called for a regional peace order "that guarantees the security and existence of all states, including Israel and the Gulf states."
At the same time, Merz stressed that "the territorial integrity of Iran must be preserved." He made clear that "the Iranian state must remain functional, public order and basic services must be maintained", specifically to prevent "uncontrolled migration movements from Iran." On calls for regime change in Iran towards greater democracy and human rights, Merz said: "The Iranian people have the right to freely decide their own fate." He added that it was important "to create the conditions as quickly as possible for this country to be stabilised and to receive a democratically legitimate government."
From breaking news to thought-provoking opinion pieces, our newsletter keeps you informed & engaged.
