German Federal Election results - 24th February 2023

In the recent German election held on February 23, 2025, the conservative CDU/CSU alliance, led by Friedrich Merz, secured 28.5% of the vote, positioning Merz to become the next chancellor. The far-right Alternative für Deutschland (AfD) achieved a historic second place with 20.8%, while Chancellor Olaf Scholz's Social Democrats (SPD) experienced a significant decline, obtaining only 16.4% - their worst post-war performance.  

The conservative victory has instilled cautious optimism in financial markets, with positive movements in the euro and German equities. The formation of a stable government and the successful implementation of proposed economic reforms will be critical in sustaining investor confidence and ensuring long-term economic stability. 

Friedrich Merz has pledged to implement business-friendly policies, including relaxing fiscal rules, increasing defence spending, and boosting economic investment. These proposed reforms have been well-received by investors, contributing to the euro's appreciation and the DAX's positive performance. However, forming a stable government may prove challenging due to the need for coalition partners. Merz aims to establish a "grand coalition" with the SPD by Easter, but this will require navigating policy differences, particularly regarding immigration and fiscal reforms.  

The AfD's significant gains reflect growing voter disillusionment with mainstream parties, influenced by public discontent over immigration and economic issues. Despite their strong performance, mainstream parties have ruled out forming a coalition with the AfD due to their controversial policies and extremist connections.