The CDU/CSU-SPD grand coalition under Chancellor Friedrich Merz formed after the February 2025 federal election continues to hold despite sharp state-election losses in September 2026 and rising AfD support. Both parties have repeatedly signaled commitment to the arrangement through the 2027 federal budget process, citing the risks a collapse would pose to democratic stability and the AfD’s polling strength. Recent compromises on long-term care reforms and ongoing budget negotiations demonstrate continued willingness to manage internal differences over taxes and spending. Leadership speculation within the CDU and SPD resistance to certain reforms have generated tension, yet no party has withdrawn or forced a confidence vote. Traders therefore price an 88.5 percent probability that the coalition survives intact into 2027.