natreve.com – On February 23, 2025, Germany held its federal elections, resulting in significant political shifts and setting the stage for complex coalition negotiations.

Election Results

The conservative CDU/CSU alliance, led by Friedrich Merz, emerged victorious with 28.5% of the vote, securing 208 seats in the Bundestag. This marks an increase of 4.4 percentage points from the previous election. The far-right Alternative for Germany (AfD), under Alice Weidel, achieved a historic 20.8% of the vote, translating to 152 seats—a substantial gain that positions them as the second-largest party. The ruling Social Democratic Party (SPD), headed by Olaf Scholz, faced a significant setback, obtaining only 16.4% of the vote and 120 seats, reflecting a 9.3 percentage point decline. The Greens garnered 11.6% (85 seats), while The Left secured 8.8% (64 seats). Notably, the Free Democratic Party (FDP) and the far-left Sahra Wagenknecht Alliance failed to surpass the 5% threshold required for parliamentary representation.

Political Implications

The AfD’s unprecedented rise, particularly in former East German states, signifies a shift in the political landscape. Despite their gains, Friedrich Merz has categorically ruled out any coalition with the AfD, emphasizing the CDU/CSU’s commitment to democratic values. Instead, Merz has proposed forming a “grand coalition” with the SPD to ensure governmental stability. This proposal comes in the wake of the SPD’s electoral losses, which may influence their decision-making in coalition discussions.

Market Reactions

The election outcome has been met with relief in financial markets. The prospect of a CDU/CSU-led government is perceived as a continuation of pro-business policies, leading to a 1.4% rise in DAX futures and the euro reaching a one-month high against the dollar. Investors are cautiously optimistic, anticipating that a stable coalition will be formed promptly to maintain economic momentum.

Leadership Changes

In response to the FDP’s failure to re-enter parliament, party leader Christian Lindner has announced his resignation. This development underscores the challenges faced by smaller parties in the current political climate and may prompt internal restructuring within the FDP.

Next Steps

The immediate focus shifts to coalition negotiations. While the CDU/CSU holds the largest share of seats, they lack an absolute majority, necessitating alliances to form a functional government. The SPD, despite its losses, remains a potential coalition partner, and discussions are expected to commence imminently. The formation of a new government is anticipated by Easter, as indicated by Merz, to ensure a seamless transition and address pressing national and international issues.

In summary, Germany’s 2025 federal election has resulted in a notable realignment of political forces, with the conservative CDU/CSU securing a plurality and the far-right AfD making significant inroads. The coming weeks will be pivotal as coalition talks determine the country’s political trajectory and its approach to both domestic and global challenges.