German elections offer fresh warning to politicians

Given almost half of the world’s population resides in a country staging an election this year, 2024 was always likely to throw up a series of political headlines. The French elections earlier this summer sparked market volatility, and we would expect to see nerves rise again heading into November’s US presidential election. However, currently it is the lesser-known German states of Thuringia and Saxony drawing the attention of investors.

In elections over the weekend, Alternative for Germany’s (AfD) win in Thuringia made it the first far-right party to come first in a state election in Germany since the 1930s. AfD also came a close second in the state of Saxony. The newly formed left-wing, anti-immigration party Bündnis Sahra Wagenknecht (BSW) also achieved a double-digit vote share. Both parties have said military aid to Ukraine should be curtailed and that the way to end the conflict is for Ukraine and Russia to negotiate. Meanwhile, the left-leaning government of the Social Democrats (SPD), the Greens and Liberals saw their combined vote share cut in half.

While the surge in popularity for parties regarded as extremist may have been sobering to many, the immediate impact appears limited. AfD did not win a majority and the other parties have vowed not to join them in any coalition, so they will remain on the sidelines in opposition, though their seat share may mean they can block certain state constitutional changes in Thuringia and Saxony.

It is also important to note that rather like elections for the European Parliament, regional elections can often throw up extreme results due to voters using them to protest. In addition, the two states in question (which represent 7% of the population) are in eastern Germany, where radical politics has historically found stronger support. Indeed, recent national polls for Germany’s federal elections in 2025 show AfD currently polling far lower at around 18%. Leading those polls at around 30% are the conservatives (CDU/CSU), who if victorious would most likely enter coalition with one or two of the existing parties in power. Similar to France, then, it seems that while radical parties are obtaining a much higher share of the vote than in the recent past, this is not enough to earn them a place in government.

Investors should certainly be mindful of such political developments, not least because even in opposition, support for fringe parties can influence mainstream policy – Brexit being one stark example. While the most recent developments in Europe and elsewhere would not appear to require an immediate change in sentiment or asset allocation, the trends are quite clear. A growing number of disgruntled voters around the world have taken issue with the way immigration is being handled, and the same cohort also seem less keen on providing ongoing financial and military support to Ukraine. If these developments are left unattended by mainstream or centrist politicians, they are likely to build to a point where they will certainly influence the political and by extension economic outlook for certain countries.