European capitals are preparing for the possibility that German Chancellor Friedrich Merz could lose power or face a domestic political crisis that diverts his focus from EU budget negotiations, according to two officials with knowledge of internal discussions. At least two national governments have held war-gaming sessions to assess the impact of a potential collapse of Merz’s coalition or his replacement, particularly on the proposed €2 trillion EU budget, where Merz leads a bloc pushing for cuts amounting to "hundreds of billions of euros" .

German media have begun referring to the situation as *Kanzlerdämmerung*—the chancellor’s twilight—amid rising far-right support and divisions within Merz’s CDU-SPD coalition. Diplomats see three possible outcomes: a government collapse, Merz’s resignation, or a struggle to maintain power amid domestic distractions. German Green MEP Hannah Neumann noted that coalition partners are likely to avoid early elections, given the far-right Alternative for Germany’s lead in polls, stating, “all coalition partners know that they have a great deal to lose from early elections” .