**Friedrich Merz faces sustained pressure as chancellor of Germany’s CDU-SPD grand coalition following heavy CDU losses in three state elections in September 2026, including the party’s first-ever failure to enter a state parliament in Mecklenburg-Vorpommern and a second-place finish behind the Left in Berlin.** National polls show his personal approval at historic lows around 11 percent, with the AfD leading at 26-30 percent and the CDU/CSU near 20 percent. The October 12 resignation of Labor Minister and SPD co-leader Bärbel Bas, citing coalition attacks, has heightened internal tensions over pension, tax, and welfare reforms. Party leaders have rallied behind Merz for now, pursuing image adjustments and cost-of-living measures while rejecting early elections that could benefit the AfD. Traders weigh these factors against the absence of an open leadership challenge and the coalition’s thin Bundestag majority, with upcoming reform debates and any further state votes likely to influence near-term odds of a premature exit.