Germany's political uncertainty diminishes investor confidence

The surging support for Germany's populist parties is casting doubt on the country's political stability just one year ahead of its general election.

According to the latest Politico poll, the far-right party Alternative for Germany (AfD) achieved a historic win in two eastern states, securing over 30% of the vote.

The AfD took first place in Thuringia and came a close second in Saxony, while the newly established far-left party, the Alliance Sahra Wagenknecht (BSW), finished third in both regions.

In stark contrast, Chancellor Olaf Scholz's three-party ruling coalition – the Social Democratic Party (SPD), the Greens, and the Free Democratic Party – collectively garnered less than 15% of the vote.

If this trend continues, Chancellor Scholz may be forced to call a snap election, a political move commonly seen in countries like France and the UK this year. 

The growing influence of Germany's far-right and far-left political groups highlights public dissatisfaction amid rising living costs and increased immigration following Russia's invasion of Ukraine.

Despite being on opposite ends of the political spectrum, both the AfD and the BSW share common ground on key issues: they are anti-immigration and pro-Russia, advocating an end to Germany's support for Ukraine and the resumption of Russian gas imports.

The AfD is also sceptical of the euro and climate change, calling for a return to Germany's old currency and an end to the country's green energy transition.

However, neither the far-right nor far-left parties are likely to form a governing majority alone, with the BSW potentially playing a crucial role in balancing political power among parties.

A scenario could arise similar to France's snap elections, where Marine Le Pen's