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Social Democrat Olaf Scholz elected German leader as Merkel era ends

Olaf Scholz, designated Federal Chancellor, is pictured during the meeting of the German Bundestag.

Florian Gaertner | Photothek | Getty Images

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

Scholz, a member of the socialist SPD party, will lead a three-party coalition with the Greens and the pro-business FDP party.

Their coalition deal has stood out from previous plans due to an intention to ramp up investment across the country. However, 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’s farewell

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

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

Outgoing German Chancellor Angela Merkel is in the focus of photographers as she stands on the tribune prior to a session at the Bundestag in Berlin.

INA FASSBENDER | AFP | Getty Images

In addition, her leadership was also marked by the 2008 financial crisis and the 2011 sovereign debt crisis. While critics argue Merkel was too tough in pushing austerity policies in the euro zone, supporters 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” Wednesday that the last few years of Merkel’s reign were notable for a lack of progress. “This progress [now] needs to be done,” he said.

Another key challenge for the new government will be geopolitics. In particular, a U.S. 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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