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The conservative CDU/CSU will lead the government.
Before the election they have ruled out coalitions with the far right AfD, the Greens and the Left party.
Which leaves only one option: A coalition with the social democrats SPD.
If the social democrats were smart, they could now drive up the price of the coalition and demand lots of concessions from the conservatives, since they painted themselves into a corner.
But the social democrats aren't tactically smart that way. They'll cave and become a good little junior partner, afraid that any pressure would push the conservatives to ally with the far right AfD, and they'll be fed some scraps for electing CDU's Merz as chancellor.
Very little progress will happen in the next 4 years, our infrastructure will continue to crumble, and the reform of our traffic sector will grind to a halt. But at least both parties aren't fans of Putin or enemies of the EU, and the SPD will likely manage to prevent any conservative policy roll-back. My guess is defense spending will increase and nothing will be done about the cost of living.
Then in the next election, it will need a coalition of 3-4 parties to still keep the Nazis out of government.
Can the CDU break the promise of not collaborating with the AfD? Or is there a guarantee? If those two form a coalition it would dominate all other possible coalitions. It feels like there's a lot of overlap between the two.
It's possible, but not likley in this election-cycle. If they have to choose between a coalition with one or more left parties and the AFD, it is possible that they will indeed choose the right wing option, since they are, as you point out correctly, much closer in their ideology.