The future of Angela Merkel’s government is in doubt after the election by her junior coalition partners, the Social Democrats (SPD), of a new leftwing leadership duo who have pledged to renegotiate the terms of the alliance.

Norbert Walter-Borjans and Saskia Esken, from the left of the SPD, have called for major policy concessions from Merkel’s Christian Democrats (CDU), and say they are prepared to pull the plug on the partnership.

Germany is facing the prospect of months of political uncertainty with the collapse of the coalition, which has been fragile since its inception after the 2017 election, a growing likelihood. It also raises the prospect that Merkel, who has said she will not run for another term in office, will face an earlier exit from the political stage than she intended.

Walter-Borjans and Esken narrowly secured first place in the SPD leadership vote on Saturday on 53%, beating the expected winners Olaf Scholz, the finance minister and vice-chancellor, and Klara Geywitz by eight points in a second-round runoff.

The result, delivered on a 54% turnout of the 425,000 SPD members, was a blow to Scholz, one of the architects of the grand coalition, and is widely seen as a vote of no confidence in him.

Profile Norbert Walter-Borjans and Saskia Esken Show Norbert Walter-Borjans The 67-year-old political economist who joined the SPD at the age of 31, has sometimes been referred to as Germany's Bernie Sanders for his insistence that the SPD must lead the country out of the "neoliberal wilderness". He has said the SPD had drifted into believing that lower taxes and VAT rises were the best way to run the country, and he would look to reverse this thinking, in the unlikely event he was elected co-leader. The father of four who paints and sculpts in his spare time, earned a reputation as a risk taker willing to take on the rich and powerful during his time as finance minister in North-Rhine Westphalia, Germany´s most populous state, when he paid €19 million for CDs containing whistleblower's data on thousands of Swiss bank clients. The move prompted tens of thousands to voluntarily pay back €7.2bn in unpaid taxes. In an interview with the Guardian last month, Walter-Borjans - often referred to as NoWaBo for short - said the country was in need of a large amount of investment and that he would rather Germany abandoned its commitment to balancing the federal budget, the so-called "black zero", to free up money for this. "If the economy does indeed enter a downturn then we will need to make massive investments. Because our infrastructure is not in a good state, and nor is our digital infrastructure nor our schools. We have to question the black zero.” Saskia Esken The 58-year-old from Baden-Württemberg is even less well known than her male counterpart. She joined the SPD at the age of 29, and has been in the Bundestag since 2013, taking a clear left-wing position, and like Walter-Borjans also critical of the SPD´s "neoliberal" politics under Gerhard Schröder, and voting against a tightening of the government's extradition policy, but has largely remained low-profile. Married with three children, she counts among her hobbies woodland walks with her dog, as well as music and literature. During the campaign as well as criticising the grand coalition, she made a particular point of stressing the need for reform of the European Union including introducing a Union-wide fiscal policy including cracking down on tax evasion. Photograph: Axel Schmidt/AFP

The immediate focus is now on Scholz. If he decides he has to resign from his ministerial roles as a result of the defeat, the coalition would in effect be over, even if an election would not happen until well into next year.

The uncertainty reflects the tensions at the heart of German politics, following ever stronger challenges to the mainstream parties from the far-right Alternative für Deutschland, the leftwing Die Linke and the Greens.

The central plank of the leadership campaign by Walter-Borjans and Esken was their opposition to the SPD’s participation in the coalition, which is in part blamed for its decreasing support. Many in the party believe that governing in Merkel’s shadow has contributed to its poor showings in regional and European elections this year, which in turn led to the resignation of Andrea Nahles, the SPD’s first female leader.

It is the first time the party will have two people at the helm, with the new leaders, who are due to be sworn in at the SPD’s headquarters next Friday, saying they will only consider continuing to support the government if major concessions are made by the CDU.

Among their main demands are an increase in the minimum wage from €9 an hour to €12 and a backtrack on the government’s central fiscal policy of balancing the federal budget, known as the “schwarze Null” or the “black zero”, to allow for more spending on infrastructure and welfare programmes. They are also calling for a more radical approach on the climate emergency.

The CDU has made it clear it is unlikely to accept such demands. Speaking after the result, Paul Ziemiak, the party’s general secretary, said: “Our aim is to govern Germany well, and the foundations for this are in our coalition agreement. This internal decision by the SPD changes nothing in this regard.”

If the coalition dissolves, Merkel, who has been in power since 2005, would have to choose whether to resign, call a confidence vote, or attempt to lead a minority government under her leadership or that of someone else within the CDU, or to start negotiations over the formation of a new government.

The CDU is itself in a precarious position. Even if it obtained the strongest result in a general election, which is considered likely, recent poll results indicate its vote share could well be lower than in 2017, when it secured just under 33%, its worst result in almost 70 years. The resulting CDU-SPD alliance took six months to negotiate.

Addressing the party, Eskens said she recognised the need to bring the party together. “If we want to succeed we need everyone,” she said. “Not only those who voted for us. We extend our hands to everyone. Now is the time to stand together.”

Asked whether he believed the coalition was on the verge of collapse, Walter-Borjans said: “Ah, not yet, let’s wait and see.”