Merkel's party suffers embarrassing loss in German regional election

German chancellor Angela Merkel's Christian Democratic Union has suffered a shock loss in a German regional election, finishing third in the leader's own constituency.

Right-wing populist party Alternative for Deutschland claimed a significant coup by gaining second place in the region of Mecklenburg-Vorpommern, ahead of the CDU and behind the Social Democrats.

The SPD triumphed with 30.5%, with anti-immigration outfit AfD reaching 20.9%, and Merkel's CDU finishing with 19%, according to projections late on Sunday night.

The defeat for Merkel's party represents its latest setback following its acceptance of a junior role in a coalition with the Greens in Baden-Wuerttemberg earlier this year.

The debate surrounding Germany's strategy during the European refugee crisis has brought the AfD into the political spotlight, aligned with the emergence of similar populist groups in other major European countries.

However, according to Holger Schmieding from German investment bank Berenberg, the regional election result is unlikely to trigger any wholesale upheaval in Germany.

"The rise of the AfD does not pose a serious risk to the fundamental orientation of German politics," said Schmieding. "As in March, today’s vote is highly unlikely to put Merkel’s position at risk. She has no obvious rival or successor. By far the most likely scenario remains that Merkel will run again at the next federal election in September 2017 – and will remain chancellor thereafter."

Merkel has not confirmed whether she will seek a fourth term in the 2017 general election, but indications are that she will.

An AfD candidate in Mecklenburg-Vorpommern said that he was proud of the party's result, and predicted the end of the Chancellor's reign.

"The icing on the cake is that we have left Merkel’s CDU behind us," Leif-Erik Holm said. "Maybe that is the beginning of the end of ­Merkel’s time as chancellor."