• Pressure is mounting on German Chancellor Olaf Scholz after the far-right AfD made substantial gains in the European Union election on Sunday.
• The AfD became the second strongest party in Germany after clinching 15.9% of the vote, ahead of Scholz's SPD, which won 13.9%.
• The result emerged despite a string of scandals for the AfD in recent weeks and months and adds pressure to Scholz's governing coalition, which is on unsteady ground.

Pressure is mounting on German Chancellor Olaf Scholz after the far-right AfD made substantial gains in the European Union election on Sunday despite a string of scandals.

The AfD secured 15.9% of the vote, according to preliminary results, beating Scholz's SPD (social democrats) and its two coalition partners in the current German government, the Greens and the FDP (free democrats).

The SPD lost support from the 2019 election, winning just 13.9% of the latest votes. The Green party's support weakened sharply from 20.5% in 2019 to 11.9% in 2024, while the FDP only registered a minor decline, securing 5.2% of votes in the latest poll.

Incremental gains meanwhile turned Germany's opposition, the CDU (Christian democrats), into the strongest party, with 23.7% of support.

The results deal the latest blow to Scholz's government, which has faced a string of crises from a struggling economy to budget issues and concerns about the popularity of the far right. At a national level, the AfD was last ahead of the SPD and in second place overall, according to a leading general election poll.

AfD success despite scandals

The AfD's success comes despite rising tensions in and around the party in recent weeks and months. Last month, it was kicked out of the right-wing Identity and Democracy (ID) alliance in the EU parliament, which includes France's Rassemblement National.

This came after Maximilian Krah, the AfD's lead candidate for the European Parliament was quoted as saying that not all members of the German Nazi regime's SS unit were criminals. Earlier this year, one of Krah's employees who was based in the European Parliament was arrested for allegedly spying on the parliament for China.  

Krah was previously a frontrunner for a position to represent AfD in the European Parliament, if the party won such seats. On Monday, Krah nevertheless said the newly elected AfD members of the European Parliament had now voted for him not to be a part of the delegation. According to a CNBC translation of a separate social media post, Krah wished his colleagues good luck with re-joining the ID alliance without him.

CNBC has reached out to AfD for comment.

The AfD's second-in-line for the European Parliament, Petr Bystron, faced allegations of bribery and money laundering, which were linked to Russia and to spreading pro-Kremlin propaganda.

Both Krah and Bystron were barred from campaigning for the EU election by their party.

AfD rose to electoral success despite months of anti-right protests across Germany, with the party gaining support from young people. Initial analysis from research institute Forschungsgruppe Wahlen and from German news outlet ZDF showed late on Sunday that 17% of 16-24-year-olds voted for the party.

What's next for Scholz?

"The result shows the weakness of the ruling coalition," Marcel Fratzscher, president of the German Institute for Economic Research told CNBC on Monday. "It destabilizes the coalition that is already very unstable."

Opinions appear divided about whether a snap election could be on Germany's horizon, in line with a step taken by Scholz's French counterpart Emmanuel Macron.

Fratzscher on Monday said this outcome was "not unlikely," even though none of the current coalition partners would benefit by way of gaining electoral share.

The smallest of the three ruling parties, the FDP is on the brink of the 5% hurdle it needs to cross to be part of the national government, he said. Once they cross this threshold, the FDP could pull out of the coalition and potentially trigger a snap election in the hope of securing spots in the national parliament for the coming years, Fratzscher explained.

Holger Schmieding, chief economist at Berenberg, nevertheless played down the possibility of an early election.

"None of the three parties in the current coalition has anything to gain from early elections. Expect the coalition to soldier on even after likely setbacks at regional elections in September," he said late on Sunday.

Jörg Asmussen, former ECB board member and former German deputy finance minister, shared the view.

"For Germany, I think the outcome means that the current traffic light government will continue to muddle through. I don't see any kind of vote of confidence or new elections in Germany," he told CNBC on Monday.

Germany's constitution states that only the president may call snap elections, under restricted circumstances. Historically, elections have only taken place early after Chancellors have called for and failed no-confidence votes in parliament.

The EU vote outcome could also have implications on next year's general election in Germany and on the odds of SDP nominating Scholz to campaign for a second term as Chancellor, Deutsche Bank economists said in a research note on Monday.

"This rather weak result might fuel a debate about whether he is the right candidate to lead the SPD into next year's general elections," they said.