Friedrich Merz’s CDU-SPD coalition has faced persistent low approval, internal friction over cabinet changes, and pressure from the rising AfD ahead of September 2026 eastern state elections, yet the government has advanced a July reform package on taxes, pensions, and bureaucracy to address economic stagnation. Traders price an 87.5% chance he remains chancellor through 2026 because coalition partners view a collapse and snap federal vote as riskier than continued governance, given AfD polling strength and the firewall against cooperation with it. A constructive vote of no confidence or voluntary exit remains possible but lacks the immediate parliamentary momentum or party consensus needed before 2027, even after expected state setbacks.