Growing Economic Malaise Drives German Mittelstand Toward AfD Amid Political Volatility

Germany's Mittelstand, the backbone of the country's economy, is increasingly disillusioned with current political leadership, fueling a shift toward the Alternative for Germany (AfD) party. Despite Germany's status as an economic powerhouse, its growth has been sluggish, with just 0.3% annual expansion since 2019, trailing countries like the US and China. This stagnation, coupled with rising business insolvencies and unemployment, has exacerbated dissatisfaction among mid-sized entrepreneurs, many of whom critically view the Social Democratic Party's (SPD) dominance in the coalition government led by Chancellor Friedrich Merz.

The governing coalition faces significant challenges in maintaining its Bundestag majority, particularly over contentious issues such as pension reforms. Within the CDU ranks, some consider the possibility of a minority government tolerated by the AfD, despite warnings from experts that the AfD’s nostalgic platform lacks credible economic solutions and risks further uncertainty.

This domestic unrest reflects a broader trend of political volatility impacting Western democracies. Analysts highlight the rise of populism in Germany and neighboring countries as a response to economic anxieties and governance dissatisfaction. The uncertainty affects financial markets and requires investors to adopt flexible strategies tailored to shifting political landscapes.

As political fragmentation grows and the traditional post-war consensus erodes, German firms and policymakers face pressing questions about economic stability and political direction. The Mittelstand’s increasing support for the AfD underscores the urgent demand for a substantially different policy approach to address Germany’s economic and social challenges.