• Friedrich Merz failed to get the majority needed to become German chancellor in a parliamentary vote Tuesday.
• The result marks an unanticipated setback for Merz who was widely expected to secure the necessary votes and be officially sworn in later in the day.
• Merz is still expected to be elected chancellor eventually, economists and analysts said, but the news was described by Berenberg's Holger Schmieding as a "bad surprise."

Friedrich Merz failed to be elected German chancellor Tuesday, after he fell short of securing a majority in a shock first-round parliamentary vote.

Merz needed at least 316 votes to become chancellor and only 310 members of parliament voted in his favor. Germany's Bundestag has a total of 630 members.

The result marks an unanticipated setback for Merz who was widely expected to secure the necessary votes and be officially sworn in later in the day.

After the result of the vote was announced the parliamentary session was halted to allow for discussion of next steps. The German stock market index extended losses to trade around 1.4% lower by 10:07 a.m. London time.

A second vote needs to take place within 14 days, according to the German constitution, with an absolute majority needed once again. There are also protocols in place in case the second vote also fails to elect a chancellor.

Merz' Social Democratic Union, alongside its sister party the Christian Social Union, won the biggest share of votes in Germany's February election. They were due to form a coalition government with the Social Democratic Party. Coalition governments are commonplace in Germany where it is very rare for a party to secure an absolute majority of over 50% in an election.

The parties on Monday signed their coalition agreement, titled "Responsibility for Germany," following weeks of negotiations that began soon after Germany's February election. 

Despite the setback, Merz is still expected to eventually be elected chancellor, economists and analysts said Tuesday.

"Friedrich Merz became the first chancellor candidate failing to be elected in the first round of voting in the Bundestag. However, he remains likely to win sufficient support eventually," Carsten Nickel, deputy director of research at Teneo, said.

Holger Schmieding, chief economist at Berenberg, described the situation as a "bad surprise." He echoed comments suggesting Merz would still become chancellor eventually, but "the unprecedented failure to be elected in the first round would still be a bad start for him."

"It shows that he cannot fully rely on his two coalition parties. That will sow some doubts about his ability to fully pursue his agenda, damaging his domestic and international authority at least initially," Schmieding said.

Who is Friedrich Merz?

The 69-year-old Merz has long been shooting for the top job in German politics. He joined the CDU when he was still in school, eventually leading the local branch of the party's youth organization. In 1989 he became a member of the European Parliament, before later joining Germany's Bundestag.

Much of Merz's political career in the early 2000s was marked by a rivalry with former German Chancellor Angela Merkel as the two competed for leadership roles in the CDU itself and within the CDU-CSU parliamentary group. Merz became chair, then deputy head, of the latter before eventually resigning from the role in 2004 — observers at the time linked this to Merkel rising through the ranks.

Before his time in politics, Merz studied law, initially working as a judge, then as a lawyer at Mayer Brown LLP. He has also held senior positions at companies including BlackRock Germany and HSBC Trinkaus & Burkhardt.