Czech president Zeman congratulates Merkel on election win

Angela Merkel is headed toward a fourth term as German Chancellor and a far-right party will enter parliament for the first time in more than 60 years, according to normally reliable exit polls released just after the voting ended in Germany.

However, according to Mr Ladegast, her coalition member for the past four years, the center-left Social Democrats (SPD) suffered a new post-war low gaining only about 20 percent and is not apt to remain tied to the CDU.

But in a bombshell for the German establishment, the anti-Islam, anti-immigration Alternative for Germany (AfD) captured around 13 per cent, catapulting it to become the country's third biggest political force.

The AfD party scored higher than expected results, with dozens of lawmakers from the party voted into the country's national Parliament - or Bundestag.

That decision complicates the situation for Merkel, who will have to look to other parties to form a new government coalition.

"Though Merkel has managed to win a fourth term, the election has perhaps been a wakeup call to everyone who felt right wing populism has died down in Europe after Macron's triumphant victory in France".

Angela Merkel's centre-right CDU/CSU lost seats and votes, but emerged as the largest party by a mile.

'We want to win back AfD voters by solving problems, by taking account of their concerns and fears, and above all with good policies'. Merkel's CDU won 32.5 percent of the vote.

An alternative coalition for Mrs Merkel would be a three-way tie-up with the liberal Free Democrats (FDP) and the Greens.

Analysts at Bank of America Merrill Lynch point out that both of Merkel's options are likely to lead to policy uncertainty and an unstable government that could lead to early elections. Protesters threw stones and bottles at police outside the AfD's campaign party in Berlin on Sunday evening.

Early analysis suggests a quarter of AfD's voters abstained in the last election.

The euro slipped 0.4 percent to $1.1912 against the dollar on Monday but was higher against the Swiss franc and was broadly flat against the Japanese yen. "We will bring back our nation", Gauland said.

Founded in April 2013, the party won 4.7% of the votes in the 2013 federal election, narrowly missing the 5% electoral threshold to sit in the Bundestag.

The national German government has never seen a Free Democrats and Greens alliance, the AP reported.