Bittersweet win for Merz: Germany's chancellor-in-waiting must be careful what he wishes for: MAGGIE PAGANO

For once the polls got it right: Germany’s voters went for the jugular, producing what can only be described as a political earthquake.

With a stunning 83 per cent turnout of voters, the populist right-wing party, Alternative for Germany, was the star performer, doubling its share of the vote to finish second.

The Left wing party made strong gains while the Greens were knocked down a couple of pegs. Voters turned against the present Chancellor Olaf Scholz’s centre-left Social Democratic Party which suffered its worst ever electoral defeat.

This has left Friedrich Merz, leader of the CDU and its Bavarian sister the CSU, as the clear winner with 28.5 per cent of the vote, though short of the 30 per cent they had been hoping for.

Yet it’s a bittersweet victory for Merz, one that has left him in a precarious position. Never before in Germany’s postwar history has a party other than the CDU and the SDP finished in the top two in the Bundestag election.

And never before has Germany been so divided, the centrist parties so squeezed with voters turning to the extremes, both left and right. And, as the Afd vote showed, between east and west.

Coalition: Friedrich Merz's Christian Democrats, their Bavarian sister party the Christian Social Union and the Social Democrats have a combined 328 seats in the 630-seat parliament

These fissures in the electorate matter hugely, as they will dictate the colours of the rainbow coalition which Merz hopes to put together by Easter. It’s only when the Chancellor-in-waiting assembles his partners that we will know how he will handle the big issues from economic reform to migration measures as well as the growing split with the US over NATO and Ukraine.

No wonder the financial markets, after an initial rally yesterday after the results, appear so subdued. They are as puzzled as the rest of us: trying to guess the outcome of Metz’s rainbow is one for the birds.

An old school pro-EU conservative and strong Atlanticist - said to be in the mould of a Ronald Reagan - the 69 year old Merz is a business lawyer turned politician late in life.

The former BlackRock director has already put boosting Germany’s economic growth, relaxing business regulations and more free-market reforms, controlling migration and increasing defence spending top of his list.

Yet Merz, who also campaigned with the promise of €100 billion of unfunded spending, can only do so by relaxing Germany’s debt brake, considered by many to be as sacred as the Holy Grail. Changes to the brake - which limits the federal budget deficit to 0.35 per cent of GDP - needs a two-third majority in the Bundestag.

Merz has hinted he would work with the SPD and the Greens as they are the most sympathetic to higher spending; Scholz’s attempt to reform the rule was one of the reasons for his defeat.

Whoever Merz partners with - and he has ruled out working with the AfD - firing up Germany’s industrial powerhouse is no easy task. The country has now endured two years of decline.

Its manufacturing base has suffered massively because of soaring inflation and rocketing energy costs after cutting off its previous reliance on Russian gas, turning instead to more expensive renewable energy sources.

Exports are down around the world, particularly to China. Only a few months ago VW laid off thousands of workers and closed factories, claiming it could no longer compete with EVs made in China. Such a blow would have been unthinkable even a decade ago.

The country also faces mounting pension costs - a third of all government spending went on pensions last year - an ageing population.

Merz has also indicated he may do an about-turn on nuclear policy and take a far more hawkish line on China.

While he has also promised to meet its NATO obligations to take defence spending to 2 per cent of GDP, he has yet to comment on President Trump’s more recent demand for 5 per cent.

But he has given a hint. Asked about the NATO summit in June, Merz questioned ‘whether we will still be talking about NATO in its current form then or whether we will have to establish an independent European defence capability much more quickly’.

If that’s the case, building up such an army would require even more billions in spending. Merz would have to break the fiscal brake, risking the wrath of Berlin and Brussels, and alienating the Afd, which is implacably opposed and ready to pounce. He must be careful what he wishes for.