The recent election results were crystal clear: in both state elections, the so-called Alternative for Germany (AfD) made significant gains. In Bavaria, the far-right party is now the third-strongest political force, and in Hesse, it's the second-strongest. Nationwide polls indicate AfD support well beyond the 20% mark. As of today, it could even garner the most votes in the three crucial state elections in East Germany next September. Co-federal spokesperson Alice Weidel has already cheered, stating her party is no longer just an East German phenomenon but rather a "pan-German People's Party" that also wants to assume governmental responsibility.

Right-wing populists, classified as a case of suspected extremism by the Federal Office for the Protection of the Constitution, sitting in federal and/or state governments? Even if it doesn't come to that, Marcel Fratzscher is concerned: "The strength of the AfD at the ballot box is a significant threat to the economy and prosperity of Germany if democratic parties now attempt to mimic AfD positions even more", warns the President of the German Institute for Economic Research (DIW). "This is especially true for economic and climate policies as well as immigration policy, where a backward-looking approach could lead to a departure of companies and a loss of competitiveness."

The DIW, along with other leading economic research institutes in Germany, has already pointed out the changing political climate and the spread of extremist ideologies. What is now at risk is something that was considered self-evident in Germany until recently: a social climate where households and businesses have the confidence that the fundamental rules of our society are widely accepted and will therefore endure in the future.

Economists are concerned about the increasing extremism both on the right and left. However, the focus is currently exclusively on a party that is gaining momentum. "While the immediate economic risks of this trend might be limited, it poses significant threats to long-term growth and prosperity prospects," cautioned Oliver Holtemöller, Vice President of the Halle Institute for Economic Research, during the presentation of the joint economic forecast. He specifically mentioned anti-immigration sentiments as a concern.

In recent weeks, some prominent figures in the German business sector – ranging from Evonik CEO Christian Kullmann to Daimler Truck Chief Martin Daum – have joined the choir of caution. The leadership of the Federation of German Industries (BDI) is now also taking a public stance. President Siegfried Russwurm and Managing Director Tanja Gönner reiterated this week that democracy, freedom, openness, respect, diversity, opportunities for all, social market economy, and Germany's integration into the European Union are the cornerstones of the country and society.

Furthermore, the international network of the German industry worldwide is a "crucial factor for our prosperity and the success of our economy." As per Russwurm's and Gönner's statement, the AfD has "an unclear, partially rejecting, and hostile relationship" with these principles and the fundamentals of the liberal democratic order.

Similar concerns are echoed in the financial sector. "Few sectors are as internationally oriented as the financial sector," says Heiner Herkenhoff, Chief Executive of the Association of German Banks (BdB). "We consider this an obligation to strongly oppose xenophobia and advocate for a pluralistic society." Herkenhoff also warns that strengthening populist and extremist parties undermines not only the democratic system but also goes against the interests of workers and the economy.

Entrepreneur and politician Harald Christ is pleased to see that prominent figures in the German business community are now publicly speaking out against the populism of the AfD's, highlighting that the party endangers Germany's location and prosperity. "A lot has changed recently," says Christ in an interview with Börsen-Zeitung. Previously, he noted that while people personally agreed with him against right-wing extremists, they didn't express it publicly, apparently out of fear of becoming targets themselves. "This is a dangerous development in a democracy," warns the 51-year-old.

Christ, a former member of the Social Democrats and later treasurer of the Free Democratic Party, who now runs his own consulting firm and sits on the Commerzbank's supervisory board, has long been taking a clear stance against the extreme right in his networks and therefore had to face several shitstorms. Recently, he made headlines with a donation of over €250,000 to the Union and the so-called Ampel-coalition parties (SPD, FDP, Greens). His goal was to set an example for party democracy, as he emphasizes. Left-wing party Die Linke and the AfD did not receive any money.

Christ believes that it is not enough for the German business community to merely make public statements against right-wing populists. "We must be aware that the image we project in Germany is crucial for the future of the economic location and is closely monitored internationally," he believes. Associations, civil society, scientists, family entrepreneurs, and corporate leaders must live up to their role model function, speak up, and show their faces and stances continuously. "At the end of the day, it's also about the employees themselves and about the value of the companies, which will be affected if there is insufficient investment in Germany or if the necessary qualified immigration is lacking."

The German Economic Institute (IW) conducted a survey of the CEOs of German business and employer associations to provide a more detailed empirical picture of the expected impact of the AfD's upswing. According to the IW, the immediate effects are still relatively low, except for the deterrent effect on foreign skilled workers in AfD strongholds. They cite inadequate digitalization, bureaucracy, or high levies as location risks rather than extremist tendencies.

In the long run, the risks in the associations are seen as significantly higher – especially regarding the political culture and political effectiveness at the federal and state levels, rather than economic concerns. In a survey published in September, 68% of respondents see a "high risk" in the long term for securing skilled workers, 62% regarding the stability of the European Union and the Euro, and 60% for the economic location in general. Free trade agreements are considered at risk by 55% of the CEOs due to the AfD's rise.

When asked about how to counter these risks, economists and association heads first point to the federal government. "The best response to the AfD's strength is a future-oriented policy, also concerning the economy and investments, to offer people perspectives and opportunities," explains DIW President Fratzscher. Rainer Dulger, President of the Employers' Association, also points out the example of climate protection back in July: everyone must be involved in climate protection efforts because many currently feel overwhelmed or patronized. "If we manage to come closer together as a society, we will take the wind out of the sails of those who divide us," he notes. In this context, the IW highlights that the state elections in Bavaria and Hesse have reiterated that the AfD is strongest in industrial regions undergoing transformation.

"Something must be done", says Harald Christ. He mentions that an increasing number of persons, including wealthy individuals and business leaders, are contemplating leaving the country — not solely, but also because of the current political climate. As a response, Christ is actively involved in organizing an initiative. His goal is to collaborate with influencers, CEOs, and board members to bring attention to the dangers of political extremism, ensuring it becomes a prominent topic on the public agenda. "I don't intend to sit passively at my desk and leave the field to the populists," he asserts. This determination stems from the clear realization after the state elections in Bavaria and Hesse that the AfD's support is not limited to East German states but is a nationwide phenomenon.