Postwar German politics has a reputation for being moderate, consensual and a touch on the dull side. But there have been moments of high drama. In November 1959, for example, the Social Democratic party (SPD) abandoned its historic ambition to replace capitalism with socialism, dropped the Marxist account of class struggle and began to pitch itself as a broad-based Volkspartei (people’s party). History vindicated the decision. For the next 50 years or so, the SPD vied for power with the country’s other great political force, the CDU (and its CSU Bavarian ally), as both parties regularly achieved a vote share of over 40%.

Famed for their practice of big-tent politics, what the CDU and SPD would give for such numbers now. The agonies of Brexit and the rise of rightwing populism have claimed the political limelight around Europe. But those looking for clues to the continent’s future would do well to watch Germany closely over the coming weeks.

The traditional powerhouses, which formed a “grand coalition” in 2018 to run the country, are each divided and dispirited. A succession of rebuffs in regional elections has led to calls in both parties for more radical and distinct policies. Later this month, in an innovation born of desperation, SPD members will vote in a new leader. They will choose between two joint candidacies, one from the left and one from the right of the movement. To say that there is pressure to get this right would be an understatement. Last month, in state elections in Thuringia, the westernmost of the five former East German regions, the party scored a dire 8.2%, and finished a humiliating fourth. The state was won by the hard-left Die Linke, which has always polled well in the region and on this occasion received almost four times as many votes, its most emphatic win yet. This defeat for the Social Democrats followed a similarly poor result in Saxony, and nationally the SPD is polling at a miserable 15%.

Results like that in Thuringia point both to Germany’s political fragmentation and to a more general challenge to the country’s economic orthodoxies. The new head of the European Central Bank, Christine Lagarde, has suggested that Germany should spend more and save less to boost the eurozone economy. One of the four candidates for the SPD leadership, Olaf Scholz, is minister for finance in the coalition government and has reiterated his commitment to the so-called schwarze null (black zero) policy, which commits the country to balanced budgets. But the two leftwing candidates, Norbert Walter-Borjans and Saskia Esken, have called for massive investment and an end to the borrowing-averse economics that German politicians have practised since the war. If they are victorious, they are likely to pull the SPD out of the grand coalition and force a snap election.

Meanwhile, the CDU is conducting its own inquest, having been beaten in Thuringia by the far right nationalists of Alternative für Deutschland (AfD). Angela Merkel has already said she will not contest the next federal election, due in 2021. But as the party prepares for its annual congress, which begins in Leipzig on Friday, there is talk of an attempt to block her presumed replacement, the unpopular CDU chair, Annegret Kramp-Karrenbauer. Some figures in the party are advocating an end to the ban on pacts with AfD, a terrible move that would significantly shift the centre of gravity on the right of German politics, and represent a definitive break with the liberal immigration policies of Merkel.

As has happened elsewhere, the challenges of 21st-century capitalism in western European societies – low growth, the legacy of deindustrialisation, migration and the fallout from the crash – have eventually led to a crisis of the political centre. But Germany’s economic pre-eminence means that its response carries a special weight within Europe. Last week, it narrowly avoided going into recession. Its economy remains strong but the boom has ended and German politics will have to respond with more expansionary strategies. Stability has long been the dogma in Berlin, but 60 years after the legacy of Marx and Engels was discreetly put to one side by the SPD, revisionism is in the air again.