Current Market Outlook

Prediction markets currently assign a low 20% probability to the CDU/CSU–SPD German federal coalition breaking before the end of 2026. This price indicates the market views a premature collapse of Chancellor Olaf Scholz's "traffic light" coalition replacement as unlikely. With the contract trading at 20¢ for a "Yes" outcome, the implied stability is significant, suggesting traders expect the government to complete its full term despite public friction.

Key Factors Driving the Odds

Two structural factors heavily suppress the odds of a break. First, all three governing parties face severe internal crises and poor polling. The SPD and Greens are near historic lows, while the CDU/CSU opposition leads polls above 30%. A snap election would likely be catastrophic for the current coalition partners, creating a powerful mutual incentive to maintain the government. Second, Germany's constitutional "constructive vote of no confidence" mechanism makes forcibly ousting a chancellor extremely difficult, requiring an opposition majority to immediately agree on a successor. This high bar for parliamentary overthrow adds stability.

Second, the coalition has already survived major internal stress tests, including a 2024 budget crisis and deep disagreements over China policy and defense spending. The fact it navigated these without collapse sets a precedent for muddling through future disputes. The parties have shown a consistent pattern of last-minute compromise to avoid triggering a government crisis.

What Could Change These Odds

The primary catalyst for a dramatic shift in probability would be a collapse in support for one party within the coalition, making continued governance more damaging than an election. For instance, if the SPD were to fall consistently below 14% in national polls, its leadership might calculate that leaving the coalition to rebuild in opposition is the lesser evil. A major, unresolvable policy rupture on a core issue like future Ukraine support or a significant economic shock could also force a break.

The market's long time horizon of nearly 350 days means numerous state elections and European Parliament results will serve as interim stress tests. A disastrous result for the coalition in the 2025 federal state election in North Rhine-Westphalia, Germany's most populous state, could destabilize the national government's calculus. However, the overwhelming incentive for all three parties to avoid an early federal election remains the dominant market logic, keeping the "Yes" probability anchored at low levels.