The CDU/CSU–SPD grand coalition under Chancellor Friedrich Merz, formed after the 2025 federal election, faces notable strain from CDU losses in September 2026 state elections in Saxony-Anhalt, Mecklenburg-Vorpommern, and Berlin, alongside Merz’s low personal approval and national polling weakness. SPD leaders have voiced reservations over aspects of the reform agenda, including tax and social policy measures, while internal CDU discussions have floated a potential chancellor swap. Both parties have nonetheless signaled commitment to continuation, citing risks of empowering the AfD through early elections or minority governance, constitutional hurdles to swift dissolution, and the slim parliamentary majority that still supports legislative progress on budget and structural reforms. Traders view these shared incentives for stability as outweighing near-term tensions through at least early 2027.