WSJ What’s News - Political Crisis in Germany as Merz Fails to Win First Vote as Chancellor

Episode Date: May 6, 2025

A.M. Edition for May 6. Germany enters a period of political uncertainty as Friedrich Merz, winner of the recent election, fails to secure enough support in a first-round vote in parliament to be confirmed as the country’s next chancellor. Plus, the WSJ s peaks to Harvard’s President as the White House cuts off the university from new federal funding. And new details emerge about Defense Secretary Pete Hegseth’s widespread use of Signal for official Pentagon business. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

The Trump administration cuts off Harvard from new federal funding, plus a political crisis in Germany as election winner Friedrich Merz fails to become the country's next chancellor. Him not being elected on the first ballot is a major surprise. It certainly weakens him as a candidate. It is not possible to say who exactly was responsible for this because the vote is secret, but it is certainly unprecedented in German history. And a storm of uncertainty makes the fence job a whole lot harder as policymakers meet today. It's Tuesday, May 6th. I'm Luke Vargas for the Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. We begin with the Trump administration's battle with leading American universities,

as the Education Department has informed Harvard that it's been cut off from any new federal grants, with Secretary Lyndon McMahon accusing the school in a scathing letter of violating federal law and losing its privilege of partnering with the federal government, adding that it could instead draw on its $53 billion endowment and tap wealthy alumni. As a part of the funding fight, the government has demanded oversight of Harvard's admissions, faculty hiring, and governance in order to address what it said was the school's failure to stop harassment of Jewish students on campus. A Harvard spokesperson said those demands would have chilling implications for higher

education. And in an interview with the journal, university president Alan Garber said the administration's attack on fellow Ivy League school Columbia had in part informed his decision to fight. What I have heard is that Columbia had still not resolved their issues with the federal government after many weeks of negotiations. So undoubtedly that has made institutions think that that may not always be the most promising path. Well speaking of Columbia, we are reporting that the Trump administration has proposed

terms for federal oversight of the university, which could see a judge ensure that the school has viewpoint diversity among its faculty and does not consider race in admissions. Columbia spokesman said the journal's story didn't hold merit and pointed to prior comments from the university's president that the school would reject any agreement requiring it to relinquish its independence. We are exclusively reporting that Defense Secretary Pete Hegseth's use of the messaging app Signal for official Pentagon business was more extensive than previously disclosed. According to people familiar with his management practices. That included engaging in at least a dozen separate chats, and in one case telling aides to inform foreign governments about an unfolding military operation.

We report that Hegseth also set up many of the chats himself, sending texts from an unsecured line in his Pentagon office, as well as from his personal phone. Hegseth didn't respond to requests for comment. The Pentagon's acting Inspector General is currently investigating Hegseth's use of Signal, and while previous administrations have used non-government message apps, a 2023 Pentagon directive restricted the use of Signal for official business. Experts say that using Signal could put sensitive information at risk of landing in the wrong hands.

And given that, as we report, Hegseth's messages in some cases disappeared without being properly recorded, it could potentially violate laws requiring the preservation of official records. Canadian Prime Minister Mark Carney is in Washington today to meet with President Trump at the White House. It's the first meeting between the leaders since Carney won election last week by convincing voters he was best qualified to take on Trump and avert a punishing trade war with the U.S. On top of slapping tariffs on Canadian goods, Trump has repeatedly suggested that Canada

should become the 51st U.S. state, but yesterday told reporters he didn't know what the leaders would discuss. I don't know if he's coming to see me. I'm not sure what he wants to see me about, but I guess he wants to make a deal. Everybody does. They all want to make a deal because we have something that they all want. Carney has said his meeting with Trump would mark the start of negotiations to recast the economic and security relationship between the countries. Let's head to Germany now, where conservative leader Friedrich Merz's bid to become the

country's next chancellor failed in parliament this morning, a surprise outcome in a vote that he had been expected to win smoothly. The unprecedented development puts Europe's political leadership in disarray at a time when Merz had hoped to present a strong front as the continent contends with economic and security threats. Matthias Dieling is an assistant professor of political science at Trinity College Dublin. This vote has just occurred here. What do we know about how all of this unfolded? How did this happen? This is certainly a major surprise. It is the first time in the history

of the Federal Republic that a nominated chancellor has not been elected on the first ballot in the Bundestag. It was widely unexpected. So Friedrich Merz was expected to be elected on this first vote as coalition or prospective coalition of CDU, CSU and SPD. It's actually a majority of 12 seats in the new parliament, which doesn't sound a lot, but actually is not even in the top five of narrowest majorities that we've seen in the past. So he certainly did not receive the full support of his prospective coalitions. And so him not being elected on the first ballot is a major surprise. It certainly weakens him as a candidate. It is not possible to say who exactly was responsible

for this because the vote is secret, but it is certainly not precedented in German history. Nat. All right. So what comes next here and what is the significance of all of this for Europe? The EU, for instance, is expected today to be discussing the bloc's response to US tariffs. There are also, of course, security concerns as the bloc looks to rearm. A tricky time for Germany to be lacking leadership. So the German constitution outlines very clearly, has very clear rules for situations like those. According to Article 63, the Bundestag can now elect a candidate within 14 days.

This candidate could be Mr. Merz, but also wouldn't need to be Mr. Merz. There could also be alternative candidates, although I hasten to say that I would expect him to seek election in the second round of voting. But of course, the delay that follows from that, because the next round of voting could earliest take place tomorrow, of course, it was not expected, but also is quite significant given the challenges that both Germany, but also is quite significant given the challenges that both Germany but also Europe more broadly face. Mertz was expected to travel to France tomorrow. This is very unlikely, of course, to go ahead given the

circumstances now and given the challenges that Europe faces, of course, and delay in electing a new stable German government is certainly not great news. Nat, Mattias Dieling is an assistant professor of political science at Trinity College Dublin. Matias, thank you so much for being with us on What's News. Thank you for having me. Coming up, the Federal Reserve and corporate America struggle with the economic outlook amid changing trade winds and why empty offices could mean higher tax bills for you and me. That's after the break.

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Our guns are stored securely, locked in a safe that the kids can't access. Awesome. Learn how to have the conversation at AgreeToAgree.org, brought to you by the Ad Council. Federal Reserve officials are gathering this morning to kick off a two-day policy meeting, with markets watching how the central bank will react to the rollout of President Trump's

tariff policy. Deputy Finance Editor Quinton Webb says the Fed is expected to hold rates steady for now, as it faces a potentially lose-lose scenario, either trying to navigate a recession or manage a period of stagflation. The really big question is, does the Fed decide to kind of hold off on rate cuts for a bit longer than it might just because it wants to kind of stay the course on inflation? Or does it start to cut a little bit more preemptively, in which case, you know, it's

kind of trying to underpin growth, but it runs the risk of exacerbating any inflationary pressures that are starting to build in the system. And Quinton says that making sense of the economic outlook isn't just tricky for the Fed. Corporate America is struggling to get its head around the tariffs. You know, it's not clear what tariffs will remain in place for the long term, which tariffs might be rolled back after negotiations with trading partners.

And so, for example, Ford and Mattel, the company behind Barbie, have both suspended their outlooks for the year. That's effectively sort of saying, we don't know right now what we can guide you to. Other companies, in some cases, some of the airlines have done this, have laid out alternate sets of guidelines, so they've sort of given outlooks for different economic scenarios. So that really points to the kind of extraordinary level of economic uncertainty at the moment that corporate America and investors face. And for more insights into the U.S. economy, check out the latest episode of WSJ's Take

on the Week, which features former Kansas City Fed Chair Robert Kaplan, who has the inside scoop on the Fed's thinking. Take a listen on WSJ.com or wherever you get your podcasts. And finally, Boston is facing a budgetary dilemma that could be a canary in the coal mine for other US cities. At the root of the problem is a decline in office values, some of which have tumbled by 50% in recent years as vacancy rates keep ticking higher. That's proved especially painful for Boston, which gets a greater share of revenues from

commercial property taxes and specifically offices than any city in the country, leading it to send tens of thousands of homeowners bigger than expected tax bills in order to make ends meet, stirring up election year frustration directed at Mayor Michelle Wu. What Mayor Wu has tried to do, she tried to do this last year, was because the system would naturally shift the tax burden from the commercial property owner to the residential property owner, she tried to pass state legislation which would shift that burden back to the commercial property owner and was unsuccessful in doing it.

That's Journal Commercial Real Estate Reporter Peter Grant. As you can imagine, the commercial landlords weren't very happy with that. They were saying, hey, you're kind of hitting us when we're down. The office market is getting crushed because of the slow return to work and because of high interest rates, and then you're trying to hurt us more by increasing our tax rate. Meanwhile, the residential owners were saying,

hey, we don't want this either. So the politics of this are very much heating up in Boston, and they will likely heat up in other cities as well. They can do what Boston is doing. They can cut services. They can try to impose new taxes, but they're going to have to deal with these problems in a certain way. According to a study of 13 of the largest U.S. office markets by the Urban Brookings

Tax Policy Center, commercial property tax revenues could decline by as much as 3 percent by 2031. And that's it for What's News for this Tuesday morning. Today's show was produced by Kate Bulevent and Daniel Bach. Our supervising producer is Sondra Kilhoff, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.