Germans head to polls amid economic uncertainty

Germans were voting in a national election on Sunday that is expected to see Friedrich Merz’s conservatives regain power and the far-right Alternative for Germany (AfD) score its best ever result as Europe’s ailing economic powerhouse lurches rightwards.

Merz’s CDU/CSU bloc has consistently led polls but is unlikely to win a majority given Germany’s fragmented political landscape, forcing it to sound out coalition partners.

Those negotiations are expected to be tricky after a campaign which exposed sharp divisions over migration and how to deal with the AfD in a country where far-right politics carries a particularly strong stigma due to its Nazi past.

That could leave unpopular Chancellor Olaf Scholz in a caretaker role for months, delaying urgently needed policies to revive Europe’s largest economy after two consecutive years of contraction and as companies struggle against global rivals.

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It would also create a leadership vacuum in the heart of Europe even as it deals with a host of challenges, including U.S. President Donald Trump’s threats of a trade war and attempts to fast-track a ceasefire deal for Ukraine without European involvement.

Germany, which has an export-oriented economy and long relied on the U.S. for its security, is particularly vulnerable.

Germans are more pessimistic about their living standards now than at any time since the financial crisis in 2008. The percentage who say their situation is improving dropped sharply from 42% in 2023 to 27% in 2024, according to pollster Gallup.

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Attitudes towards migration have also hardened, a profound shift in German public sentiment since its “Refugees Welcome” culture during Europe’s migrant crisis in 2015.

Musk weighs in

Sunday’s election follows the collapse last November of Scholz’s coalition of his centre-left Social Democrats (SPD), the Greens and pro-market Free Democrats (FDP) in a row over budget spending.

The SPD is headed for its worst result since World War Two.

The election campaign has been dominated by fierce exchanges over the perception that irregular immigration is out of control, fueled by a series of attacks in which the suspected perpetrators were of migrant origin.

It has also been overshadowed by the unusually forceful show of solidarity by members of the Trump administration - including Vice President JD Vance and tech billionaire Elon Musk - for the anti-migrant AfD, and broadsides against European leaders.

The 12-year-old AfD is on track to come in second place for the first time in a national election.

“I’m completely disappointed in politics, so maybe an alternative would be better,” said retired Berlin bookkeeper Ludmila Ballhorn, 76, who plans to vote AfD, adding she was struggling to live on her pension of 800 euros. “Rents and all other costs have soared.”

The AfD, however, is unlikely to govern for now as all mainstream parties have ruled out working with it, though some analysts believe it could pave the way for an AfD win in 2029.

Still, its strength, along with a small but significant vote share for the far-left and the decline of Germany’s big-tent parties, is increasingly complicating the formation of coalitions and governance.

Coalition options

EU allies are cautiously hopeful the elections might deliver a more coherent government able to help drive forward policy at home and in the bloc.

Some also hope Merz will reform the “debt brake,” a constitutional mechanism to limit government borrowing that critics say has strangled new investment.

The most likely outcome of this election, say analysts, is a tie-up of Merz’s conservative bloc of Christian Democrats (CDU) and Christian Social Union (CSU) with the SPD, which is polling in third place in another uneasy “grand coalition”.

Polls, however, suggest another three-way coalition may be necessary if several small parties make the 5% threshold to enter parliament, complicating talks.

“A lot of my friends are likely going to vote for the conservatives because this government didn’t work so well and Merz’s international standing is quite good,” said Mike Zeller, 26, a civil servant.

“I just hope enough parties agree to a government so they can leave the AfD out.”