Chancellor Friedrich Merz said he will remain in office and push his economic reform package through the Bundestag, after the Christian Democratic Union fell below the 5% threshold in Mecklenburg-Western Pomerania and lost a state parliament for the first time since World War II.
"We can't sugarcoat the results," Merz told reporters at CDU headquarters in Berlin on Sunday. "It's a disaster."
Preliminary official counts put the far-right Alternative for Germany at 38.2% in the northeastern state, up 21.5 percentage points from 16.7% in 2021, giving it 32 of the parliament's 71 seats and its first first-place finish there. The Social Democratic Party took 35.5% and 29 seats. The CDU won 4.9%, down from 20.8% five years earlier and short of the 5% needed for representation.
The result lands two weeks after the AfD more than doubled its vote in Saxony-Anhalt to 43.8% on Sept. 6, while the CDU there halved to 17.2%. In Berlin's state election the same day, the CDU slipped to 18.8%, down 9.4 points from 2023, trailing Die Linke at 25.7% — the first time the far-left party has topped a Berlin vote. The AfD rose to 16.3% in the capital from 9.1%.
Merz's approval has fallen to just over 10%, from a peak near 42% in July 2025, and the CDU/CSU bloc has slid to 21% nationally from 30% over the same period, according to the polling cited by German public broadcasters ARD and ZDF. The AfD now leads national surveys with close to 30%.
The AfD's path to governing remains blocked. The SPD, Greens and Die Linke have all ruled out cooperation, and mainstream parties maintain a firewall against a party whose Saxony-Anhalt branch is designated a right-wing extremist organization by the Federal Office for the Protection of the Constitution — a classification the AfD rejects. State co-leader Leif-Erik Holm had said his goal was an AfD-only government before softening late in the campaign.
"We are the strongest force and have reached the mainstream of the population," AfD national co-leader Alice Weidel said on Sunday. Asked by the BBC how long Merz has left in office, she replied in English: "Pretty soon, he's going to leave."
The economic backdrop is doing much of the work for the party. German output contracted in both 2023 and 2024 before returning to marginal growth, and household assets in the east stand at 49% of western levels — 140,300 euros versus 257,100 euros as of 2023, up from 61,200 euros and 125,500 euros a decade earlier. Manuela Schwesig, the SPD state premier since 2017, attributed roughly 45,000 former SPD voters switching to the AfD to dissatisfaction with the federal government and opposition to German financial and military support for Ukraine, and pointed to the AfD's campaign to reopen the Nord Stream pipelines that once carried Russian gas ashore in the state.
Merz has framed his tax, welfare and economic overhaul as the answer to that discontent, and the vote removes none of the arithmetic he needs to pass it. His coalition with the SPD holds a federal majority, and the leaders of all eight CDU-governed states publicly backed him last week. Burkard Dregger, a CDU lawmaker in Berlin, told the BBC that Merz "has got four years and we have to give him the four years."
The constraint is time and credibility rather than votes. Merz has already canceled several engagements, including attendance at the UN General Assembly, to manage the fallout — a signal that the political cost of the reform agenda is now being paid in governing capacity. The Times of London reported there is no overwhelmingly convincing candidate inside the CDU to replace him, which is the main reason a mid-term "chancellor swap" remains speculation rather than a scheduled event.
For investors, the transmission runs through German fiscal credibility rather than through any single state's budget. A chancellor governing at roughly 10% approval with two consecutive eastern state losses behind him has less room to absorb a reform package that misses its growth targets, and more incentive to widen borrowing or delay contentious measures. Bund spreads, the euro and German industrials tied to energy and defense spending are the instruments that price that risk, and the next scheduled test is the federal budget debate, where the coalition must show the package can still clear the Bundestag.
The last time a mainstream German party was excluded from a state parliament was in the early years of the Federal Republic, when the 5% threshold was introduced precisely to prevent fragmentation of the party system. Its first failure in that role, 77 years later, is the clearest measure yet of how far the AfD has moved from the fringe — and of how narrow Merz's margin for error has become.
This article is for informational purposes only and does not constitute investment advice.
