Story highlights A far-right party relegated Angela Merkel's party in her home state to third

Leader of populist AfD party said Merkel's CDU party is "falling apart"

(CNN) Could the success of a far-right party in Germany's local elections be a harbinger of things to come?

The Sunday contest was viewed by many as a referendum on Chancellor Angela Merkel's immigration policy, and her party suffered a significant defeat on her home turf.

Merkel admitted Monday that decisions on immigration played a role in the result, but insisted that she has made the right ones.

Alternative für Deutschland, or AfD, defeated the Christian Democratic Union -- Merkel's party -- in local elections in the state of Mecklenburg-Vorpommern, coming in second behind the Social Democratic Party, according to exit polls.

AfD was only formally founded in April 2013, yet it defeated the CDU in the German chancellor's home state.

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