Germany's Social Democratic Party (SPD) made history by electing its first ever female leader, but now the hard work must begin to reunite a party punished in the last election. The move hailed as "great progress" by party grandees on Sunday, with 66 percent of SPD delegates voting in favor of Andrea Nahles. The former labor minister and head of the SPD's parliamentary group will take the helm of the party that is joining Chancellor Angela Merkel's Christian alliance in a coalition government. Martin Schulz, the departing leader of the SPD, told CNBC that Nahles was "tough enough" to gain the trust of SPD members who were more reluctant about her appointment. Meanwhile, the SPD's Deputy Chairman Ralf Stegner cheered the appointment. "You can see in her speech (Sunday) that she has the experience, competence and the emotional power of a social democratic leader to stand for an SPD that you'll see as the leading party in European affairs, in terms of peace and progress in Europe, which will be a very important thing to do," he told CNBC's Annette Weisbach on Sunday.

Coalition risk

The SPD's joining of Merkel's conservatives in another coalition (they have governed together before) is a risky move, however, given the party's election defeat in September. The party's popularity rating remains low (the latest opinion poll giving it 18 percent) and there is still dissent within the party over the decision to enter into another grand coalition with Merkel. In a speech Sunday, Nahles said that being in government with Merkel did not spell disaster for the SPD, saying, "You can renew a party while it's in government. I want to prove that from tomorrow," according to Reuters. Stegner was among the group of SPD members that had wanted the party to remain in opposition but a vote on the matter in March saw 66 percent of the party's 450,000-or-so membership approve the tie-up. Particularly after Merkel's talks with other parties failed to reach a deal and Germany's political future looked uncertain.

Stegner told CNBC the party needed to reunite and build trust among German voters. "We will have to prove that being part of the government means progress for ordinary people in Germany and, on the other side, that as a party we think about the future, besides what we're doing in government, and that has to be done at the same time and Andrea Nahles is the right person to do that," he said.

The future of Europe

Nahles' appointment comes after the SPD's long-time leader Schulz resigned after the party suffered a bad defeat in Germany's federal election, a vote that saw Germany's political scene shift dramatically with the right-wing Alternative for Germany (AfD) becoming the third largest party in the country and entering the Bundestag for the first time. The rise of the AfD was seen as part of a backlash against Merkel's policy at the height of the region's migrant crisis in 2015, in which over a million migrants, mainly from war-torn areas of the Middle East, entered Germany. It was also seen as part of a wider anti-establishment sentiment that has swept through Europe, with parties campaigning on a euroskeptic message doing well at a national level — such as the Lega party and Five Star Movement in Italy where they are now the biggest parties.

Andrea Nahles, new leader of the German Social Democrats (SPD), speaks at an SPD federal party congress on April 22, 2018 in Wiesbaden, Germany. Simon Hofmann/Getty Images