By Miranda Murray and Andreas Rinke
BERLIN, Sept 7 (Reuters) - Chancellor Friedrich Merz ruled out working with the Alternative for Germany on Monday after the far-right party surged into first place in state elections in Saxony-Anhalt but conceded the result had shaken his party "to its very foundations".
The AfD is appealing to lawmakers from Merz's conservatives to support its bid to rule the eastern state, in what would be the first time a far-right party takes power at state level in postwar Germany.
The anti-immigrant, pro-Russia AfD won nearly 44% of the vote, an outcome that underlined the deep unpopularity of Merz's ruling coalition and also triggered alarm among Germany's neighbours, France and Poland.
However, the party — which wants to deport immigrants, halt support for Ukraine and restore ties with Moscow — fell short of an absolute majority in the state legislature, winning 39 of the 83 seats, and hopes to poach individual conservative lawmakers.
The election result could test the longstanding refusal of Germany's mainstream parties, including Merz's Christian Democrats (CDU), to work with the AfD, a policy known as the "firewall". The AfD says this is undemocratic.
"This shakes our party to its very foundations. We cannot simply carry on as before, nor can I, nor can the federal government," Merz said, according to the Bild newspaper.
"We have a strong constitution; we have all the tools to defend the constitution against a right-wing extremist state government — but our party system is undergoing a tectonic shift," he added.
Merz, whom opinion polls show to be the most unpopular chancellor in modern German history, faces more state elections in the coming weeks and into next year, though he hopes his mix of reforms and higher spending in some areas will revive growth in Europe's largest economy.
The AfD's national co-leader Tino Chrupalla appealed to CDU lawmakers to make a "centre-right conservative majority" in Saxony-Anhalt possible.
"Partisan games really ought to be a thing of the past," he told German radio, referring to the firewall policy.
Ulrich Siegmund, the party's lead candidate in the state, said he would hold discussions with various parliamentary groups.
He recalled during the election campaign how one CDU mayor had donated to the AfD and said there appeared to be "a remnant — a vestige — of common sense within that party".
BSW PARTY A POTENTIAL PARTNER
The only German party that has signalled readiness to work with the AfD is the populist left-wing BSW, which on Monday echoed Chrupalla's criticism of the "firewall" policy.
The BSW shares the AfD's hostility towards mass immigration, which it says undermines local workers' rights, and also advocates for ending Germany's support for Ukraine and restoring ties with Moscow.
Both parties characterise sanctions on Russia as needlessly self-sabotaging, denying German businesses access to Russia's vast cheap energy resources on which Germany's export-driven economy was able to thrive for decades.
"Peace in Europe" was the second biggest factor driving which way people voted in Saxony-Anhalt, according to numbers from the ARD broadcaster.
During the campaign, the AfD tapped into growing disillusionment with established parties, which it characterises as tired and out of touch, offering instead a range of hardline policies, a promise of cleaner and safer streets and a revival of national pride.
For some, there is also a nostalgia for life in the former communist-run East Germany.
According to a breakdown of voters, the AfD was particularly popular among men, with 50% voting for the party compared to 39% of women. AfD voters also tended to be less economically secure and less educated.
Saxony-Anhalt is a relatively small state, and one of the poorest in Germany's former communist east, but Alice Weidel, the AfD's other national co-leader, hailed Sunday's result as a milestone and said her party aimed to win at least 40% in the next national election, due in 2029.
The AfD has been classified as right-wing extremist by the local office of Germany's domestic intelligence service.
The AfD dismisses accusations of extremism as scaremongering and an insult to the party's millions of supporters.
'VERY, VERY WORRYING SIGNAL'
While far-right leaders in Europe welcomed the result as a mandate for change, and U.S. billionaire Elon Musk cheered on the AfD from the sidelines, French Finance Minister Roland Lescure told RTL radio it "sends out a very, very worrying signal".
"This shows that we face a major challenge in the face of a populist wave which is spreading around the world today and which we must resist," said Lescure, whose own country holds national elections next year that could see far-right veteran Marine Le Pen become president of France.
Spanish Prime Minister Pedro Sanchez said it showed the far-right threat was "gaining ground in Europe and in the world."
Eva Umlauf, a survivor of the Auschwitz Nazi concentration camp and president of the International Auschwitz Committee, was dismayed.
"As Holocaust survivors, we never would have thought it possible that a far-right party would once again take its place as the largest parliamentary group in a German state legislature," she said. "This election result frightens us!"
(Reporting by Miranda Murray, Andreas Rinke, Benjamin Mejias, Gilles Guillaume, Pawel Florkiewicz; writing by Miranda Murray and Matthias Williams Editing by Gareth Jones)
