German business urges swift reform after AfD win in Saxony-Anhalt

Germany’s small and medium-sized enterprise sector, known as the “Mittelstand”, has urged the federal government to implement “reform” following the Alternative for Germany’s (AfD) clear victory in Saxony-Anhalt.

Representing the group that forms the backbone of Europe’s largest economy, Christoph Ahlhaus, head of the German Federal Association of the Mittelstand, told Bloomberg that an urgent change in policy is needed to restore confidence in Germany’s economic future and to curb support for “populist” parties.

In an interview on Monday, Ahlhaus stated that the AfD’s victory in Saxony-Anhalt was “a clear signal for all people in Berlin and for Chancellor Merz,” adding, “The disappointment is very, very big.”

Germany’s traditional industrial sectors, ranging from automotive to chemicals and engineering manufacturers, are under intense pressure to adapt to a rapidly shifting competitive landscape.

High energy prices, bloated bureaucracy, and fierce price competition from Chinese rivals are eroding profits and triggering sweeping restructurings, fuelling anxieties over the economic future among industrial workers.

Ahlhaus noted that the vast majority of companies do not support the AfD’s policy aimed at reducing economic integration in Europe, arguing that crackdowns on immigrants could become a “major problem” for small and medium-sized enterprises.

Martin Lück, chief capital markets strategist at Franklin Templeton, said in a note: “The extremely strong performance of the AfD is, above all, an important political signal, but not yet an acute development for the capital market.” He continued:

“From an investor’s perspective, this creates problems if doubts arise regarding the state’s European integration, fiscal reliability, openness to international skilled labour, or the continuity of its energy and industrial policies.”

Lück added: “Saxony-Anhalt, which is particularly reliant on fresh investment and skilled labour, can hardly afford such doubts.”

Speaking to Bloomberg ahead of Sunday’s elections, the AfD’s lead candidate, Ulrich Siegmund, rejected the criticism and insisted that the party’s policies would actually help attract investment.

“Many companies want to invest in Saxony-Anhalt because they view it as a competitive edge, and having an administration that provides planning certainty once again is seen as an asset for the region,” Siegmund said.

According to Siegmund, the business community wants “to eliminate ideology entirely from economic development support and, in general, grant freedom back to companies.”

Saxony-Anhalt has the lowest per-capita GDP among Germany’s 16 federal states.

Since national reunification, Saxony-Anhalt has suffered a sharper demographic decline than any other region; between 1990 and 2024, its population fell by more than a quarter.

Marcel Fratzscher, president of the Berlin-based German Institute for Economic Research (DIW), contended that the election result was “an economic disaster as well,” saying: “Whoever forms the next government will struggle to implement reforms. Yet Germany needs very tough reforms.”

Speaking to Bloomberg, the former European Central Bank official warned that the “far-right” party’s platform could lead to catastrophe:

“If you look at the consequences of what the AfD wants, there will be a massive drop in GDP and a massive rise in unemployment. Germany is very export-dependent. Almost half of Germany’s GDP comes from exports, and the AfD will ruin [its] economic model; that will have terrible, as well as economic, repercussions.”

Major cutbacks across core sectors such as the chemical and automotive industries have heightened anxiety among workers regarding their economic future.

Far-reaching reorganisations, such as Volkswagen’s restructuring programme approved late on Thursday, will generate a domino effect across various regions of Germany, including Saxony-Anhalt.