The elephant in the virtual room on Saturday will be that the most popular candidate to succeed Angela Merkel is not on the Christian Democratic Union leadership ballot.

Either Friedrich Merz, Armin Laschet or Norbert Röttgen will be elected the new leader of Germany’s biggest party on January 16 and, typically, would also become its candidate for chancellor.

With the CDU enjoying a near 20-point lead ahead of September’s election, the winner could be tasked with steering the recovery and deciding whether to return to the ultra-prudent approach that defined the Merkel era.

However, the three candidates are struggling to step out of Merkel’s shadow, with more popular chancellor candidates waiting in the wings. A more pro-spending approach could also emerge from September’s elections.

What does life after Merkel mean for Europe’s largest economy?

Niklas Potrafke, director of the Ifo Institute center for public finance and political economy, says the “major achievement” of Merkel’s fiscal policy during her 16 years was introducing the debt brake, but adds the “expansionary fiscal policy during the corona crisis will also be a defining feature”.

The chancellor’s pre-pandemic fiscal policy was defined by an ultra-tough stance to borrowing – the thrifty “Swabian housewife” approach praised by Merkel. She and finance minister Wolfgang Schäuble brought German debt levels down to 60pc of GDP – far lower than most developed economies and from levels in line with Britain’s debt pile just after the financial crisis.

Schäuble also took a tough approach during the eurozone debt crisis and was criticised as the architect of austerity in the likes of Greece.

“The defining feature of her fiscal policy, like most of her policies, is pragmatism,” says Andrew Kenningham, chief Europe economist at Capital Economics. “She inherited a position where there was a strong consensus for fiscal prudence… Schäuble, who was the finance minister, really ran the show in terms of the macro policy and they had a reputation for being inflexibly prudent.”

Economic policy was built around strict fiscal rules aimed at cutting debt. The debt brake is a constitutionally enshrined rule after the financial crisis that limited borrowing to just 0.35pc of GDP, except during downturns, and the schwarze Null, or black zero, policy commits to a balanced budget.

But Merkel and her finance minister, the SPD’s Olaf Scholz, recognised the need to spend big during the pandemic, with Germany splashing out on one of the most generous support packages.

Saving for a rainy day proved shrewd when Covid struck. The country’s short-time work scheme, which was already in place before the pandemic, was crucial in cushioning the hit to workers and became the blueprint for furlough schemes across Europe.

Other support rose into the hundreds of billions of euros and Berlin plans to raise up to a record €471bn in debt this year to aid the recovery.

Fiscal ties between EU countries have also been tightened by the Recovery Fund, through which the European Commission will issue significant amounts of debt for the first time to offer €750bn of grants and loans.

The pandemic triggered a sudden shift in approach from Merkel’s government, but attitudes were beginning to waver even before Covid. Germany’s economy was pushed to the brink of recession by the trade war hitting its vital industrial hub. Business leaders and economists called on Berlin to open the spending taps to ramp up low public investment and economic aid, but the pandemic then accelerated the shift.

“Before the Covid crisis, there was a broad discussion about too low public investments, especially in areas such as climate change, education, public health, mobility, social housing and digitisation,” says Marius Clemens, economist at the German Institute for Economic Research (DIW Berlin).

“The narrative of the black zero has been removed by a new narrative: that the government should take advantage of the low-financing cost environment and invest into areas with high public return and large necessities.”

The looser attitudes may not persist after the pandemic, with the current budget plans pointing to a sharp tightening in fiscal policy from 2022.

The CDU and its Bavarian sister party, the CSU, are expected to decide their candidate for chancellor in the spring, ahead of elections in September, but the role of leader risks becoming a poisoned chalice.

While for the most part, the chancellor candidate has been the leader of the larger CDU, 2021 could see an alternative face the daunting task of stepping into Merkel’s shoes.

Annegret Kramp-Karrenbauer was lined up as Merkel’s preferred heir, but quit as CDU leader last year after controversy over her party’s ties with the far-right Alternative for Germany (AfD). The three names on the leadership ballot to succeed her have failed to inspire.

Merz is the frontrunner and would mark a rightward turn for the party – a risky approach given Merkel’s success appealing to the centre ground. The former corporate lawyer and chairman at BlackRock Germany has been criticised as a move to the CDU’s conservative roots, but Merz has framed Merkel’s departure as an opportunity for a shake-up.

Dubbed the “German Donald Trump”, the free marketeer wants the CDU to become more pro-business. He is known for his tough stance on immigration and faced a backlash last year to comments that critics say were homophobic.

“He would be in favour of some more deregulation and lower taxes, particularly for high earners, trying to create more of an entrepreneurial culture,” says Kenningham. “It’s not that he wants to run a bigger surplus. There’s nobody there who’s arguing strongly that they should move to a much more flexible approach where they would be happy to run a deficit of 2pc or 3pc of GDP, which would be absolutely fine.”

He adds that Merz’s less pro-European stance “might make difficulties eventually within the eurozone” as debt piles soar across the southern members of the currency bloc.

The other candidates have also failed to light up the race. Centrist Laschet, premier of the state of North Rhine-Westphalia, is pitching to voters as the continuity candidate, while Röttgen is a foreign policy expert but has the worst odds.

Far more popular options within the CDU and CSU remain on the sidelines, however. Health minister Jens Spahn has even overtaken the resurgent Merkel in popularity for his handling of the pandemic, some polls suggest, but he ruled himself out of the running on Sunday. Markus Söder, the charismatic leader of the CSU, is also thought to be in the running to be the two parties’ joint chancellor candidate.

What could prove more important for the economy is the composition of the coalition formed after the election. Germany has been run by a “grand coalition” between the CDU and SPD since the 2017 election, but the latter has struggled in polls.

The Greens have leapfrogged the SPD into second place ahead of September’s vote and would be in favour of higher spending to fund its flagship climate package.

Potrafke says a coalition formed of the left-wing parties would “abolish the debt brake and certainly would increase spending and debt”, but he does not believe a “majority within the CDU advocates increasing expenditure and debt”.

Given its current lead, the CDU is likely to be the biggest partner in the next coalition, but will not necessarily have control of the finance ministry.

“For future fiscal policy in Germany, the finance minister matters more than the chancellor,” Clemens says. “I would rather expect the coalition partner will insist on appointing the finance minister. This does not mean that the coalition partner is fully responsible for fiscal policy in Germany, but, as Schäuble and Scholz have shown, the finance ministry is essential for financial scope and thus for the room to manoeuvre expenditures of other ministries.”

German fiscal policy will be at crossroads after the pandemic, but the man who wins on Saturday may not be the chancellor that decides in which direction it goes.