When Mark Carney and Friedrich Merz took office just over a year ago, both leaders faced a difficult economic environment shaped by global uncertainty, trade tensions and a changing relationship with the United States. Yet while the German chancellor’s approval ratings have fallen, Canada’s prime minister remains comparatively strong in public opinion.
The difference, according to economist Adalbert Winkler, lies largely in how the two governments interpret the causes of their economic problems and the policies they have chosen in response.
Writing for Die Zeit, Winkler argues that Carney’s approach begins with a clear assessment of a changing global order. The Canadian prime minister has argued that the era of a rules-based, globalised economy led by the United States has ended, particularly since Donald Trump’s return to office.
For Canada, which shares a close economic relationship and a long border with the United States, the consequences have been significant. Tariffs, political influence over foreign investment and financial relationships, and broader changes in US foreign policy have created new economic pressures.
Carney has repeatedly highlighted these external challenges when discussing Canada’s economic situation. At the same time, his government has addressed domestic issues, including reforms to social systems and efforts to reduce bureaucracy, but these are presented as separate challenges rather than the main explanation for weak growth and employment concerns.
Germany’s diagnosis has taken a different direction. Despite being one of the G7 countries most integrated into globalisation and heavily dependent on foreign demand, the structural changes in the international economy have played a smaller role in the government’s explanation of economic weakness.
Instead, Merz’s economic argument has focused largely on domestic factors. The weakness of German growth has been described as mainly self-inflicted, linked to insufficient reforms of social systems and excessive bureaucracy. This interpretation has shaped the government’s economic programme.
The difference between the two approaches becomes particularly visible in fiscal policy. Carney has chosen an expansionary strategy designed to strengthen Canada’s economy through tax reductions, infrastructure investment and increased defence spending. The approach will significantly increase government debt, but Carney has openly defended the decision as necessary to reduce Canada’s dependence on economic decisions made in Washington.
For the Canadian government, higher public spending is presented as a way to build economic resilience — creating greater independence in an increasingly uncertain global environment. At the same time, Carney has announced reductions in some areas of social spending to address longer-term challenges within the welfare system.
Germany has also introduced major fiscal measures. The special fund for infrastructure and climate neutrality, combined with an exemption from the debt brake for defence spending, represents a significant economic stimulus.
According to Winkler, calculations show that this fiscal impulse is already having an effect, with almost all current economic growth linked to the additional spending. However, the overall impact has been limited by difficulties in foreign trade.
This creates a political challenge for Merz. Under a different economic interpretation, he could point to fiscal measures as a response to external shocks affecting Germany’s economy. However, because his government’s analysis places greater emphasis on domestic weaknesses, it becomes more difficult to present external pressures as the main reason the recovery has been slower than expected.
The debate therefore centres not only on policy choices but also on the economic framework used to explain the crisis. If weak growth is caused primarily by a collapse in external demand due to political developments rather than a loss of competitiveness, fiscal expansion becomes a direct response. If the problem is instead seen as a failure of domestic reform, government spending is viewed as only a temporary solution.
In Germany, many economists have traditionally placed greater emphasis on structural reforms, including changes to social systems and reducing administrative barriers. From this perspective, tariffs and other international disruptions are seen as negative but ultimately limited factors in determining long-term growth.
Canadian economic thinking has taken a different path. While reforms to social systems also receive support, they are not considered the central answer to the country’s current challenges. Instead, the focus is on strengthening domestic demand through government investment and expanding trade relationships beyond the United States.
This approach has allowed Carney’s government to pursue higher spending without facing the same level of criticism from economists over increased borrowing. The economic debate itself has provided political support for the government’s strategy.
The contrast between Canada and Germany highlights two different responses to the same global pressure. Both countries face the consequences of changing trade relations and uncertainty surrounding US policy, but their governments have framed the challenge in different ways.
For Canada, the priority is adapting to a less predictable global environment by building economic resilience. For Germany, the debate remains centred on whether the country’s difficulties are mainly caused by internal weaknesses or external disruptions.
As the economic consequences of a changing global order continue to unfold, the disagreement over diagnosis may prove just as important as the policies themselves.
