Editor's Note: (Pawel Swidlicki is an expert on the European Union, specializing in issues ranging from UK-EU relations and UK, German and Polish domestic politics to the refugee and migration crisis. Pawel was previously a policy analyst at the Open Europe think tank, where he wrote policy papers on "Brexit" scenarios and EU reform that helped shape government policy. The opinions expressed here belong to the author.)
(CNN) Not long ago, Angela Merkel's dominant position in Germany and her status as the most influential leader in Europe seemed secure.
Is this still the case? Over the weekend, voters in the German Chancellor's home state of Mecklenburg-Vorpommern handed Mrs Merkel a humiliating defeat: her Christian Democratic Union party has been pushed into third place -- only managing to win 19% of the vote -- behind the populist-nationalist Alternative für Deutschland, at 20.8%, and the Social Democratic Party at 30.6%.
This represents an unprecedented moment in German politics: the CDU has never finished behind a party so far to its right.
Formally founded in April 2013, AfD was set up by academics disgruntled by Merkel's eurozone crisis management -- most notably the Greek bailouts. However, AfD mutated into a more nationalist party that strongly opposed rising immigration levels -- particularly of people from Muslim countries.
Some in the party made common cause with the anti-Islam PEGIDA movement, whose large street rallies in Dresden and other German cities made headlines around the world.
Following months of bitter internal struggles, in July 2015 the party's original leader, Bernd Lucke, was forced out and replaced by Frauke Petry, prompting many of its founding members and early supporters to resign.
Unsurprisingly, this internal warfare damaged AfD's standing with voters, and for a while the party struggled to break through the 5% barrier necessary to secure Bundestag seats.
This all changed when Germany decided to suspend EU rules stipulating that asylum seekers must be processed in the first member state in which they arrived, and Merkel famously declared that Germany had a responsibility to take in as many refugees as it had to, dismissing concerns by repeatedly stating. "Wir schaffen es" (We can manage).
International media and commentators tend to overstate the extent to which this move was a unilateral decision by Merkel, overlooking the extent to which this course was broadly supported by her Cabinet, most politicians in mainstream political parties, much of the media and commentariat, charities and civil society as well as thousands of ordinary Germans.
Collectively, it helped cement the country's reputation as a haven for refugees and migrants, in turn prompting many more to arrive. Nonetheless, not all Germans bought into this consensus, and many of them gravitated toward AfD as the only party publicly voicing their concerns.
Whereas immigration had not been at the forefront of public concern before, the influx of refugees and migrants from September onward saw AfD's poll ratings climb steadily upward, eventually hitting 15% nationally in some polls, and even higher in the former East Germany.
Support was further boosted by the mass sex assaults in Cologne on New Year's Eve -- compounded by the perception the media were initially unwilling to report on the incidents -- and by the recent spate of terror attacks in Germany, two of which were perpetrated by recently arrived asylum seekers claiming allegiance to ISIS.
This brings us back to Mecklenburg-Vorpommern, where AfD campaigned hard on the refugee and migration issue with Leif-Erik Holm, the party's local leader, talking about the need to protect Germany's Christian heritage from the threat of "Islamic supremacy." This is despite the region taking in relatively few asylum seekers -- 5,627 so far in 2016, the fewest of any German state -- and overall numbers arriving in Germany falling since the conclusion of the EU-Turkey agreement.
This result will both give the AfD momentum going into next year's federal election and heap pressure on Merkel, who it is already being suggested should not seek a fourth term in office.
Despite liking stability at the top, there are signs German voters are developing Merkel fatigue -- a recent poll for Bild am Sonntag found 50% did not want her to stay on beyond 2017 against 42% wanting her to remain.
In my view, it is probable she will decide to stand again, not least because she still retains enough backing within her party, the fact that there are no obvious successors, and because she sees the refugee and migration crisis as unfinished business: Stepping down would be interpreted as admitting defeat.
Ultimately, barring any shocking developments, it is hard to see beyond the Christian Democratic Union/Christian Social Union winning again, with support for the SPD languishing in the mid-20s. The key question is what the margin of victory will be, and what coalition configurations will be possible; this is where AfD will play a pivotal role.
Although it has emerged as a serious competitor to the CDU/CSU for conservative voters, it would be wrong to see AfD as only posing a threat to the center right. In fact, AfD draws support from across the political spectrum; its anti-establishment credentials have helped it win over a disproportionate number of hard-left Die Linke voters and previous nonvoters. Its exact impact on the vote shares of other parties therefore remains hard to gauge.
Though AfD remains too toxic to be a viable partner itself, its presence in the Bundestag could restrict other parties' ability to form a viable coalition, potentially forcing the CDU/CSU and SPD to stick with the grand coalition -- the third in four parliamentary terms -- or encouraging the formation of a more exotic three-party coalition.A minority government would be unlikely because it would allow the AfD to determine the outcome of crucial votes.
Either way, it will allow the party to define itself further against the political mainstream and claim the mantle of the "real" opposition, and to continue shaping the country's debate on issues of immigration and cultural identity that the crisis has ignited.