By James Mackenzie
BERLIN, Sept 7 (Reuters) - The far-right AfD's triumph in the eastern state of Saxony-Anhalt marks a defeat for German Chancellor Friedrich Merz and sends a warning to other European leaders battling the same mixture of slow growth and disillusion with mainstream politics.
The Alternative for Germany (AfD), just short of an absolute majority in the Saxony-Anhalt state parliament after Sunday's vote, has become the face of opposition to the consensus-based political system that has governed
Germany since World War Two.
Thorsten Frei, the parliamentary leader for Merz's conservative Christian Democrats (CDU), called it "a watershed for our country".
In an increasingly polarized political system, Merz, whose personal approval ratings have sunk to record lows, was one of the main targets of voter ire over the cost of living, pensions and economic insecurity.
A survey by Infratest dimap for ARD public television found 87% of voters in the state were unhappy with his government. A separate survey for ZDF public television found three quarters of people, including almost half of CDU supporters, believed Merz had hurt the party's result.
In his first reported comments on the election outcome, Merz on Monday told the CDU's executive board the result had shaken his party "to its very foundations", but he also again ruled out cooperating with the AfD, according to the Bild newspaper.
The AfD has said it sees victory in Saxony-Anhalt as a first step towards winning federal elections due in 2029 but there was no immediate sign of any internal revolt against Merz in the party committees that met on Monday, CDU sources said.
One member who was present said discussions had been "open and frank" but added: "Everybody knows we have to continue with our policy."
GLOBAL 'POPULIST WAVE'
While far-right parties have governed in several European countries, the AfD's best performance so far in a state election in Germany carries an urgent warning to other nations facing elections in coming months.
In France, where opinion polls suggest the far-right National Rally could win next year's presidential election, Finance Minister Roland Lescure said the outcome of the election in Saxony-Anhalt was a "very, very worrying signal".
"It shows we face a major challenge from a populist wave that is now global," he told RTL radio.
Saxony-Anhalt, a largely rural state of some 2.1 million inhabitants in the formerly communist east, is one of the smaller German states, which has lost around a quarter of its population since Germany reunified in 1990.
Sunday's result can be partly explained by the unhealed divisions between east and west Germany nearly four decades after reunification.
And yet over the past 10 to 15 years it has staged a steady recovery from the shock of reunification in 1990, when its industry largely collapsed. Its unemployment rate is not far above the national average at 8% and it has rebuilt its chemicals industry and developed new sectors including logistics and green energy.
However, voters disregarded warnings from business groups and economists, as well as Merz himself, that a vote for the anti-immigrant AfD would put much needed foreign investment at risk and discourage the skilled workers the state sorely needs.
Amid unusually heavy voter turnout, workers, male voters and the young all voted in large numbers for the party.
Under its 35-year-old candidate Ulrich Siegmund, a TikTok adept who attracted thousands to election rallies and meetings, promising to bring back "our good, old, safe Germany", the AfD in Saxony-Anhalt brushed off its classification by the domestic security service as "extremist" right-wing.
'VERY SIGNIFICANT CHALLENGES'
"The AfD is now a highly visible political force which is far more effective at getting its message across than other parties manage to do," said Thorsten Faas, a political scientist at Berlin's Free University.
"And this is not set to change in the short term, which poses very significant challenges for the federal government in its attempts to paint a positive picture of the country and its future," he said.
For Merz, confronted with a deep-seated crisis in Germany's industrial base and battling to push through pension reforms that have proved particularly unpopular in eastern Germany, there appear to be no easy answers.
Volkswagen AG's announcement last week of a radical restructuring plan, which could see 50,000 job cuts worldwide and the closure of major factories in Germany, underlined the grim picture facing Europe's largest economy, struggling to emerge from years of stagnation.
High energy costs, fuelled in part by the wars in Ukraine and Iran, offered an easy attack point for the AfD, which found a ready audience for its argument that German support for Kyiv had needlessly antagonized Moscow and driven up oil and gas prices.
Merz came to power in 2025, pledging tough reforms to revive the economy. He abandoned decades of fiscal caution by promising to borrow hundreds of billions of euros to restore Germany's withered military and rebuild infrastructure.
But voters, particularly in eastern Germany, have given him no credit for the plans, which have so far produced few visible results.
By big majorities, voters favoured the AfD to address their main concerns around social insecurity, peace in Europe and their own economic situation, the Infratest dimap poll showed.
Before the vote, Eva von Angern, the main candidate of the far-left Left party, expressed some sympathy for Merz, saying, "He's not responsible for everything."
But she added that on the campaign trail, he was "Hate figure number one" for voters. "He's the reason why people don't want to vote for the CDU and all the other established parties."
(Additional reporting by Andreas Rinke and Inti Landauro and Sudip Kar-Gupta in ParisEditing by Gareth Jones)
