Olaf Scholz set his sights on the German chancellorship on Monday after his centre-left party narrowly came out on top in the general election.
The Social Democrats (SPD) edged out Armin Laschet’s Christian Democrats (CDU), the party of departing Chancellor Angela Merkel, which scored its worst-ever result.
The narrow result paves the way for complex coalition talks, meaning Mrs Merkel could still be in office at Christmas.
Mr Scholz hopes to form a government with two smaller parties, the Greens and the Free Democrats (FDP).
However, Mr Laschet could still become chancellor if the two kingmakers choose to side with him instead.
The SDP won 25.7 per cent of the vote, becoming the largest party in parliament for the first time since 2002. The CDU and its sister party won 24.1 per cent.
The Greens won their highest ever vote share – 14.8 per cent – but their hopes of winning the chancellorship ended in disappointment.
The FDP, which is politically closer to the CDU but has not ruled out working with Mr Scholz, made small gains to win 11.5 per cent.
Scholz's traffic-light bid
Mr Scholz said the gains for the SPD, Greens and FDP were a mandate for the parties to form a government. This would be known as a "traffic light" coalition, named after the three parties' colours.
“The voters have spoken very clearly. They have said who should form the next government,” he said in Berlin on Monday.
“They strengthened three parties – the SPD, the Greens and the FDP. That is the visible mandate expressed by the voters. Those three should lead the next government.”
Mr Scholz's calm manner was credited with leading the SPD out of a years-long slump. The party trailed third in the polls as recently as July.
But the CDU has not given up on winning the chancellorship. Mr Laschet would have a majority if the FDP and Greens agreed to work with him instead.
“It’s now about who can form a stable government, a coalition of the future,” CDU general secretary Paul Ziemiak told German TV on Monday.
“There are these two options in parliament, and the question is who will get a majority. Armin Laschet is an experienced negotiator.”
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Supporters of the SPD react to the first results of the federal election in front of the Willy Brandt House, Berlin. AP -
Voters are going to the polls nationwide in elections that herald the end of the 16-year chancellorship of Angela Merkel and the strong possibility of a new, German Social Democrats (SPD)-led coalition government. Getty Images -
People arrive to cast their ballots in the federal parliamentary elections in Berlin, Germany. Getty Images -
A person casts their vote as Olaf Scholz, the Social Democratic Party candidate for chancellor, sits at a polling booth to vote in the general election, in Potsdam. Reuters -
Annalena Baerbock, chancellor candidate of the German Greens Party, departs after casting her ballot in federal parliamentary elections in Potsdam. Getty Images -
Germany's conservative Christian Democratic Union leader and candidate for chancellor Armin Laschet and his wife Susanne Laschet arrive to cast their ballots at a polling station in Aachen, in western Germany. AFP -
Olaf Scholz, chancellor candidate of the German Social Democrats, votes in the federal parliamentary elections at a polling station in Potsdam. Getty Images -
Voters stand in line to get their ballot papers and cast their votes at a polling station in Berlin. AFP -
A young mother with two children kneels behind the voting booth at the Jane Addams School in Friedrichshain in Berlin to fill out her ballot papers. AP -
A sign for a polling station at a car dealership in Lemgo, Germany. AP -
A woman wearing the traditional Black Forest costume votes in Gutach, in the Black Forest, Germany. Reuters -
A supporter waves an SPD a flag at party headquarters in Berlin. AP -
SPD members follow early results on their phones at party headquarters in Berlin. Getty Images -
Outgoing German Chancellor Angela Merkel arrives at the CDU headquarters. AFP -
Berlin's CDU parliamentary group leader Burkard Dregger notes the first forecasts for the outcome of the Bundestag elections. Getty Images -
CDU supporters in Berlin look on nervously at exit poll forecasts. These predict that the CDU and SPD will each receive about 25 per cent of the vote. AP -
CDU activists follow results on their phones at party headquarters in Berlin. Getty Images -
Members of the media record the reactions of CDU activists watching exit poll predictions. Getty Images -
Green Party activists follow the exit poll predictions in Berlin. AP Photo -
Bettina Jarasch, the Berlin Greens' top candidate for election to the Bundestag, welcomes the first exit poll forecasts. The Greens were forecast to take 15 per cent of the vote. AP -
Green party activists follow exit poll predictions. The Greens could be major players in a coalition government. EPA -
Armin Laschet, CDU leader and top candidate for chancellor, gives his reaction to the first exit polls. Reuters -
Armin Laschet, the CDU's candidate for chancellor, Chancellor Angela Merkel and party members at CDU headquarters in Berlin. Getty Images -
Annalena Baerbock, Green party co-leader and candidate for chancellor, with her fellow leader Robert Habeck, at their election party in Berlin. AP
Mr Laschet outmanoeuvred a more popular rival to secure the CDU's nomination, but struggled to motivate the party’s base and made a series of missteps.
He acknowledged the CDU's slump was a "loss of votes that isn't pretty". The bloc's previous worst showing was 31 per cent at the first postwar election in 1949.
But he said that, with Mrs Merkel departing after 16 years in power, “no one had an incumbent bonus in this election”.
Christian Lindner, the leader of the FDP, invited the Greens to discuss their positions before they approach the two larger parties.
Both have worked with the CDU and SPD in regional governments, but such a three-way coalition has never been done at national level.
Green leader Annalena Baerbock said that “the climate crisis … is the leading issue of the next government, and that is for us the basis for any talks … even if we aren’t totally satisfied with our result”.
An alternative that was much discussed during the election, a leftist alliance between the SPD, Greens and Die Linke – a far-left party – will not have a majority.
The sixth group in parliament, the far-right Alternative for Germany (AfD), is shunned by all other parties. It made slight losses and won 10.3 per cent.
Another possibility is a renewal of the current “grand coalition” between the CDU and SPD, although both parties would prefer to avoid this.
Mrs Merkel stays in office as a caretaker until the new parliament approves a successor. There are no formal limits on her powers, but previous chancellors have not made radical decisions in this period.
Turnout at the election was 76.6 per cent, slightly up on four years ago.
Whichever parties form the next German government, Mr Lindner said it was good news for Europe that it would have a majority with centrist parties.
“All of those in Europe and beyond who were worried about Germany’s stability can now see: Germany will be stable in any case,” he said.
For the first time since 1949 the SSW party, which represents Danish and Frisian minorities, was set to win a seat in parliament.
In two regional elections also held on Sunday, the SPD looked set to defend the post of Berlin mayor that they have held for two decades. The party was also on course for a strong win in the north-eastern state of Mecklenburg Western-Pomerania.
