Germany’s problem is no longer simply that Friedrich Merz is unpopular. The political centre that governed the country for decades is losing its ability to dominate the system. The result in Mecklenburg-Western Pomerania is extraordinary. Merz’s CDU won just 4.9% of the vote, falling below the threshold required to enter the regional parliament. The AfD finished first with roughly 38%, ahead of the SPD. It was the CDU’s worst result in any state election since the Federal Republic was created. Berlin delivered a different result but the same message. The Left Party won around 25%, the CDU fell to roughly 19%, while the AfD reached about 16%. Germany’s two traditional governing blocs are being squeezed from opposite directions. This is becoming more than an electoral problem. It is becoming an economic one.

Germany needs decisions. Its industrial model is under pressure. Energy remains expensive. Infrastructure needs investment. Defence spending is rising. Demographics are deteriorating. Housing is increasingly unaffordable in major cities. Productivity growth remains weak. None of these problems can be solved cheaply. And increasingly, none can be solved politically without assembling complicated coalitions containing parties with very different economic priorities. That is the new German risk. Not instability in the traditional sense. Inability to decide.

Merz came to power promising reform and a return to growth. Instead, pension, tax and healthcare reforms have generated resistance, while living costs have remained a central voter concern. Reuters reports that economic stagnation, affordability and dissatisfaction with government policy have been important drivers of the recent electoral shift. The temptation will be to interpret the result purely through immigration or foreign policy. That would miss part of the story. The AfD has benefited from opposition to immigration, support for restoring energy links with Russia and criticism of German assistance to Ukraine. But dissatisfaction is also economic. In eastern Germany, average household wealth remains dramatically below western levels, while investment per worker is also lower.

Berlin shows the same frustration through a completely different political channel. There, the Left Party gained support by focusing on housing costs and proposing much stronger state intervention in the property market. Rents have nearly doubled since 2014, while the city estimates it will need more than 200,000 additional homes by 2040. Different parties. Different solutions. Same underlying message. A growing number of German voters no longer believe the existing economic model is delivering enough for them. That creates a difficult feedback loop. Economic stagnation fragments politics. Fragmented politics makes economic reform harder. And weaker reform prolongs stagnation. Germany may therefore be entering precisely the kind of equilibrium it can least afford. The fiscal question makes this more important. Berlin is trying to mobilise substantially more capital for defence, infrastructure and industrial resilience. That means more public borrowing just as European interest rates are rising again. Markets can finance that. But they will increasingly ask what the money achieves. Borrowing for productive infrastructure that raises future growth is one thing. Borrowing simply to compensate households and companies for structural weaknesses is another. Political fragmentation makes that distinction harder to maintain because every coalition partner brings its own spending priorities, red lines and constituencies. The result can easily become more debt without more reform.

There is also a European consequence. Germany has traditionally been the country expected to provide institutional stability when other parts of Europe became politically volatile. That assumption is becoming less comfortable. If the German centre weakens further, decisions on defence, Ukraine, energy, fiscal rules, industrial policy and European integration become harder to sustain consistently across electoral cycles. The so-called firewall under which mainstream parties refuse coalition agreements with the AfD makes the arithmetic even more complicated as the party’s vote share rises. Reuters notes that this is already forcing broader and potentially more difficult coalition combinations. Merz says he will remain chancellor. He may. But that is increasingly secondary. The real question is whether any German chancellor can still assemble enough political support to impose reforms whose benefits arrive later while their costs are felt immediately.

Germany has money. It has industrial capacity. It has institutions. What it is beginning to lack is political concentration. For decades, German stability came from governments changing while the economic consensus remained broadly intact. That consensus is now fragmenting. And Europe may soon discover that Germany’s biggest problem is not choosing its next government. It is giving any government enough room to govern.