The electoral victory Sunday, Sept. 1, by the Alternative for Germany in Thuringia, the first by a far-right party in a regional German election post-World War II, is indicative of a country whose self-confidence is at a low ebb.

To keep fringe parties at bay and remain a dependable partner for international allies, the country desperately needs to rediscover its economic and political mojo. If not, a fretful Germany could become a problem for Europe and the world.

Although populist groups on the left and right won more than 60% of the votes in the state of Thuringia and almost half in Saxony, the other parties have ruled out joining regional governments with the AfD meaning it likely won’t be able to put its policies into action.

And if current polls are accurate, the AfD won’t fare as well in next year’s federal election. Instead, the conservative Christian Democrats are expected to win around 30% of votes in 2025 and thereby the right to lead the next federal government. A snap election before then is improbable because the three members of the coalition have all seen supporters drift away.

This is reassuring, but only up to a point: A political firewall against the AfD will reinforce its voters’ sense of being marginalized and ignored. Meanwhile, the opposition conservatives are now led by Friedrich Merz, whose views on immigration are more hardline than Angela Merkel’s. (Merz has at least ruled out cooperating with the AfD, and he’s been a strong advocate for military support for Ukraine.)

Right now, Germans see trouble wherever they look, which makes them more easily wooed by the AfD and Buendnis Sahra Wagenknecht, a new leftist group that opposes migration and wants to end sanctions against Russia.

The country’s economy has stagnated for two years and inflation is only just beginning to recede; violent crime has increased (with much of it allegedly perpetrated by migrants); and instinctively pacifist Germany is having to backstop Ukraine’s defense against a devastating Russian invasion.

Rather than offer reassurance, Germany’s constantly bickering coalition government has reinforced the impression that the country has gone off the rails. Reconciling the Free Democrats’ anti-borrowing instincts with the Social Democrats’ welfare commitments and the Greens’ decarbonization zeal is often a Sisyphean task.

Frustration runs especially high in the former communist east, where allegiances to mainstream parties aren’t as long established, average wealth is lower and the population is rapidly aging after many young people emigrated to the most prosperous west.

Germany has spent a decade allowing in refugees from Syria and Afghanistan, but now a good chunk of the population thinks this humanitarianism has gone too far. The slaying of three Germans last month, reportedly by a Syrian asylum seeker, has darkened the national mood; even moderates are now in favor of restricting immigration.

Meanwhile, Chancellor Olaf Scholz has rightly provided steadfast support to Ukraine, however worries about the cost of financing its defense and supporting Ukrainian refugees are beginning to resonate among voters. Germany will this year meet its NATO goal of spending at least 2% of economic output on the military for the first time in decades.

Some of Germans’ fears are well-founded and stem from unhealthy dependencies that weren’t sufficiently addressed during Merkel’s long tenure. Cheap Russian gas and seemingly insatiable Chinese demand for German autos and capital goods gave the country a false sense of security. Low national debt was partly a function of failing to repair decrepit infrastructure. German companies also spent too long tinkering with combustion engines rather than embrace the industries of the future. A shrinking working age population is also set to hold back the country’s growth potential.

Other worries are exaggerated or self-imposed: All things considered, Germany has also done a decent job of coping with the loss of Russian gas. While some energy intensive businesses shut down, the lights have mostly stayed on. A 49-point economic plan unveiled by the coalition in July also contained some decent ideas to boost investment, cut bureaucracy and boost employment, including financial incentives for overtime and later retirement.

However, Germany’s debt brake remains an impediment to properly funding the country’s needs and makes coalition infighting about limited financial resources inevitable. Unfortunately, a parliamentary consensus on this topic looks out of reach because changing the constitution requires a two-thirds parliamentary majority, and opposition conservatives have no incentive to help.

Germany’s European allies have benefited enormously from its willingness to soak up refugees and its financial support for Ukraine — it’s the second largest provider of assistance after the U.S. Germany is also a top destination for exports for most EU member states.

But if the economy doesn’t grow, battles over how the economic pie is distributed are destined to increase, providing succor to extremists on the left and right. A stronger, more confident Germany is in everyone’s interest — with the exception of Vladimir Putin, of course.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies in Europe. Previously, he was a reporter for the Financial Times.