Political turmoil in Germany is mounting. Recent setbacks in regional elections have intensified pressure on Chancellor Friedrich Merz. The Alternative for Germany party (AfD) leads national polls at about 29%, leaving the governing CDU/CSU bloc far behind at roughly 20%. Against this backdrop, UBS analysts have devised three survival scenarios for the German government.
The first option is to maintain the status quo, with Merz staying in office supported by his party. The second foresees a quiet, administrative replacement of the chancellor via a constructive vote of no confidence. That may allow it to avoid snap elections but requires a complex deal with the Social Democrats. The third scenario is early elections. However, the governing coalition fears that option because of the AfD’s record popularity.
Political turbulence threatens to derail Germany’s exit from five years of economic stagnation. Analysts expect GDP growth of 1% in 2026 and 1.5% in 2027, supported by large fiscal injections.
UBS warns that under the first two scenarios, fear of the opposition will push Berlin to abandon painful structural reforms to the labor market and pensions in favor of broad fiscal stimulus. If the country instead moves to early elections, the budget‑approval process itself will be at risk. A paralysis of authority in Germany could also block crucial EU decisions on the bloc’s budget and on trade policy with China.
