Exit polls for the German election have revealed Mrs Merkel will remain Chancellor but her victory has been overshadowed by the far-right Alternative for Germany (AfD) party winning its first seats in the Bundestag.
Mrs Merkel’s Christian Democratic Union (CDU) party gained 32.7 per cent of seats, her coalition Social Democrats Party (SPD) led by former EU leader Martin Schulz, gained 20.2 per cent and the AfD 13.4 per cent.
The Left party gained 8.9 per cent of seats, the Greens 9.4 per cent and the Free Democratic Party (FDP) 10.5 per cent.
The AfD gained 119,000 votes from citizens who had previously not voted, as well as almost a million from the CDU.
Mrs Merkel’s sister party, the CSU which operates in Bavaria, had its worst result since 1949.
Mrs Merkel was predicted to gain more seats, with many Germans blaming her for allowing thousands of migrants into the country two years ago during her open-door policy.
Mr Schulz’s SPD party has said it no longer wants to be in a coalition with the CDU and wants to be the official opposition to give a viable alternative to the AfD whose leader has made pro-Nazi comments.
Because of this, the only option left for Mrs Merkel to form a coalition is with the Greens and FDP – called a ‘Jamaican coalition’ due to the three parties’ green, yellow and black colours.
As the polls closed at 6pm local time (5pm BST) voter turnout was predicted to be 75 per cent compared to 71.5 per cent in the 2013 elections.
SPD’s chairman, Dietmar Woidke, said: “This is a bitter evening for the social Democrats.”
Later this evening there will be a live TV debate where the leaders will decide who will go into a coalition with who.
In Germany’s proportional election system, low turn-out can boost smaller parties, such as the hard-right Alternative for Germany (AfD), giving them more seats from the same number of votes.
In regional elections this year, Merkel’s conservatives suffered setbacks from the AfD, which profited from resentment at her 2015 decision to open German borders to more than one million migrants.
But with the migrant issue under control this year, Merkel has overcome earlier doubts over running and thrown herself into a punishing campaign schedule, presenting herself as an anchor of stability in an uncertain world.
Visibly happier, Merkel campaigned with renewed conviction: a resolve to re-tool the economy for the digital age, to head off future migrant crises, and to defend a Western order shaken by Trump’s victory last November.
The overall fall in turnout masked great regional variation. North Rhine-Westfalia,Germany’s most populous state, reported a 3 percent increase in turnout, while the city of Munich saw a 10 percent increase. In some of the eastern states where the AfD is strong, turnout held steady.