**The CDU/CSU–SPD grand coalition under Chancellor Friedrich Merz has faced mounting strains since the September 2026 state elections, in which the CDU suffered sharp losses to the AfD and Die Linke in Saxony-Anhalt, Berlin, and Mecklenburg-Vorpommern, while Merz’s personal approval ratings hit historic lows.** Both partners have publicly reaffirmed their commitment to completing the term, citing the risk that early elections would further boost the AfD amid its national polling lead. Internal disputes persist over pension, healthcare, and care-system reforms, with the SPD seeking adjustments and the Chancellery blocking elements such as the proposed sugar tax; President Steinmeier has mediated to prevent escalation. Neither side currently shows appetite for triggering a collapse or confidence vote before the 2027 budget process, as alternative governing majorities remain elusive without new elections. Traders therefore price a low probability of breakup before 2027, viewing the shared interest in stability and the slim parliamentary majority as the dominant stabilizing factors despite ongoing friction.