The far-right Alternative for Germany (AfD) party is forecast to achieve its best result yet in Europe s ailing economic powerhouse.
Merz s CDU/CSU bloc has consistently led polls but is unlikely to win a majority given Germany s fragmented political landscape, forcing it to sound out coalition partners.
Those negotiations are expected to be tricky after a campaign that exposed sharp divisions over migration and how to deal with the AfD in a country where far-right politics carries a particularly strong stigma because of its Nazi past.
That could leave unpopular Chancellor Olaf Scholz in a caretaker role for months, delaying urgently needed policies to revive Europe s largest economy after two consecutive years of contraction and as companies struggle against global rivals.
A caretaker government for months would create a leadership vacuum in the heart of Europe even as it deals with a host of challenges, including U.S. President Donald Trump s threats of a trade war and attempts to fast-track a ceasefire deal for Ukraine without European involvement.
Germany, which has an export-oriented economy and has long relied on the U.S. for its security, is particularly vulnerable.
Germans are more pessimistic about their living standards now than at any time since the financial crisis in 2008. The percentage who say their situation is improving dropped sharply from 42% in 2023 to 27% last year, according to pollster Gallup.
Merz "knows something about the economy," said voter Brigitte Klute after braving the cold to cast her vote in Arnsberg, Merz s hometown.
"He needs to rebuild our country a little better. So much has been lost," she said.
MUSK WEIGHS IN
Sunday s election follows the collapse last November of Scholz s coalition of his centre-left Social Democrats (SPD), the Greens and pro-market Free Democrats (FDP) in a row over budget spending.
The campaign has also been overshadowed by the unusually forceful show of solidarity by members of the Trump administration - including Vice President JD Vance and tech billionaire Elon Musk - for the anti-migrant AfD and broadsides against European leaders.
The 12-year-old AfD is on track to take second place for the first time in a national election.
"I m completely disappointed in politics, so maybe an alternative would be better," said retired Berlin bookkeeper Ludmila Ballhorn. The 76 year old, who plans to vote AfD, said she was struggling to live on her state pension of 800 euros ($836.64) a month. "Rents and all other costs have soared," she added.
The AfD, however, is unlikely to govern for now because all mainstream parties have ruled out working with the party, though some analysts believe it could pave the way for an AfD win in 2029.
