The recent German elections have marked a significant shift in the country's political landscape. The conservative CDU-CSU alliance emerged victorious, securing 28.5% of the vote. However, this victory comes with a bittersweet note as it was their second-worst result in history. Meanwhile, the Social Democratic Party (SPD) faced a historic defeat, capturing only 16.4% of the vote, its worst performance ever.
In a surprising turn of events, fringe parties gained substantial ground. The far-left Die Linke party increased its share to 8.8%, nearly doubling its support compared to the 2021 election. The far-right Alternative fuer Deutschland (AfD) witnessed a dramatic rise, doubling its previous vote share to over 20% and becoming the second-largest force in Germany's parliament.
The AfD's success is particularly pronounced in East Germany, where it secured the vast majority of direct mandates. This surge is attributed to the party's strategic focus on economic insecurity and anti-establishment sentiment prevalent in the region. Additionally, the AfD's ability to attract a younger audience has been instrumental in its growing influence.
Migration remains a contentious issue that has fueled the rise of political extremes. The polarizing debate continues to benefit parties like the AfD and Die Linke, which have capitalized on differing public sentiments regarding open borders and immigration policies.
"The polarizing debate about migration has benefitted the political extremes," said Holger Schmieding, chief economist at Berenberg.
The CDU-CSU chief and likely chancellor-to-be, Friedrich Merz, faced criticism for supporting a non-binding motion on migration policy alongside the AfD. This collaboration marked an unprecedented moment in Germany's postwar history, as a parliamentary majority included the far-right.
"This has made the entire German political landscape more fragmented," remarked Carsten Brzeski, global head of macro at ING.
The mainstream parties now face a crucial challenge to address pressing issues such as migration and economic stability. Failure to do so could further empower fringe parties like the AfD in future elections.
"This puts the next coalition really to an even stronger test. So if they mess up, it's going to be the AfD, really, winning the next elections," warned Carsten Brzeski.
As Germany navigates this new political terrain, analysts emphasize the need for traditional parties to regain their footing and appeal to the electorate by addressing core issues effectively.
"Most importantly, it has energized the minority of Germans who want open borders for uninvited migrants and refugees. These voters have flocked to Die Linke, the only party fully in favor of that," noted Holger Schmieding.