Last week has been a big week for the EU, with the Italian elections and the release of a draft future agreement with the UK. However, arguably one of the biggest moments for the EU came as the Germany’s second biggest political party, the Social Democrats (SPD) finally agreed to a coalition with Angela Merkel’s Christian Democrats (CDU).

Merkel is considered to be the de-facto leader of the European Union, but given she now has a politically unstable situation, what implications will this have for the EU?

The centre-left SPD had furiously debated whether to extend the “grand coalition” for another four years after suffering a slump in last year’s election. In the end, 66 per cent of the party’s 464,000 members approved a coalition deal.

But the damage to the SDPs reputation cannot match the damage to Angela Merkel and the CDU. The Chancellor achieved an historic low of just 33 per cent of the votes in the election that took place back in September 2017. This is a significant downturn from the 2013 election, where Merkel achieved 41.5 per cent.

The fact that Merkel was forced to ask parties of very different stripes to form a coalition government was in itself due to the reality that Germany is not immune to the wave of populism sweeping the West.

German Chancellor Angela Merkel has finally managed to secure her leadership.

The September 24th election saw the rise of the anti-immigration protest party the AfD with 13 percent of the vote, a shock in a nation where no far-right party had entered parliament in large numbers in the post-World War II ear.

6 months of tumultuous negotiations, Merkel finally made it across the line at a huge political cost.

The clincher of the agreement lay in the SDP’s ability to nab the Foreign Affairs and Finance Portfolios in Merkel’s Cabinet. It may not sound damaging but unrest is brewing within her party who did not want to see two key cabinet posts as the price of holding onto power. Added with the poor election results and Merkel’s ability to hold onto power is seemingly murky.

Given the mutual distrust between the two big parties, “it’s possible that this coalition won’t last four years,” one senior CDU source has said. “Unlike in the past, I’m not sure this time.”

Ms Merkel, who has been chancellor for 12 years, is unlikely to run again in 2021 and thoughts are turning to who will succeed her. The issue is likely to cast a shadow over the veteran leader’s next term, with politicians already wondering aloud how she will manage the transition and placing bets on her likely heir.

The names of her potential replacements are common currency. They include Annegret Kramp-Karrenbauer, a close ally who was prime minister of the state of Saarland and who was elected last month as CDU secretary-general, and Jens Spahn, a young hopeful favoured by the CDU’s rightwing whom Ms Merkel has made health minister.

Annegret Kramp-Karrenbauer is widely tipped to be a replacement for Angela Merkel

But the question is what happens with the EU should a Merkel Government fall? The Chancellor is considered to be the flag-bearer for the EU and Germany will arguably be the most powerful leader once the UK leaves.

The Chancellor will also have to consider this as her final term in office. Her position is too precarious for her to remain onto the next election. This will undoubtedly be a sad day for the European Union; she has been a steadfast believer in the European project and a committed leader to rules based global order.

How will the EU and the European project be able to cope upon her exit? The fall of this steadfast leader would bring a more turbulent time for the European Union, which is already struggling under a variety of issues that undermine its stability.