Observers often describe political parties as critical stabilizing institutions in democratic systems of government. Because of the central role played by German political parties, many observers refer to Germany as a "party state." The government of this type of state rests on the principle that competition among parties provides for both popular representation and political accountability for government action.

The decision to regulate the organization and activities of political parties reflects lessons learned from Germany's experience during the post-World War I Weimar Republic, when a weak multiparty system severely impaired the functioning of parliamentary democracy and was effectively manipulated by antidemocratic parties. After World War II, many parties dotted the West German political landscape, but electoral laws allowed only parties with at least 5 percent of the vote to have representation in national and Land parliaments. In addition to those parties that won representation in the Bundestag in 2005, a variety of minor parties won a cumulative 2.7% of the vote, down from 3.0% in 2002. Several other parties were on the ballot in one or more states but did not qualify for representation in the federal Bundestag.

On the role of parties, Article 21 of the Basic Law stipulates that "the political parties shall participate in the forming of the political will of the people. They may be freely established. Their internal organization must conform to democratic principles. They must publicly account for the sources of their funds." The 1967 Law on Parties further solidified the role of parties in the political process and addressed party organization, membership rights, and specific procedures, such as the nomination of candidates for office.

The educational function noted in Article 21 ("forming of the political will") suggests that parties should help define public opinion rather than simply carry out the wishes of the electorate. Major parties are closely affiliated with large foundations, which are technically independent of individual party organizations. These foundations receive over 90 percent of their funding from public sources to carry out their educational role. They offer public education programs for youth and adults, research social and political issues, and facilitate international exchanges.

Putting forward candidates for political office and the organization of election campaigns both have the status of constitutional tasks. For this reason the parties are reimbursed the costs they incur in their respective election campaign. The Reimbursement of election campaign costs, a feature Germany was the first country to introduce, is now commonplace in most democracies. According to the Basic Law, a political party's internal organization must conform to democratic principles (member democracy). And all parties are expected to acknowledge the values and structure of the democratic state.

Party funding comes from membership dues, corporate and interest group gifts, and, since 1959, public funds. Figures on party financing from 1992 show that dues accounted for over 50 percent of SPD revenues and 42 percent of CDU revenues. Federal resources accounted for 24 percent of SPD revenues and 30 percent of CDU revenues; donations accounted for 8 percent and 17 percent, respectively. The parties must report all income, expenditures, and assets. The government substantially finances election campaigns. Any party that gains at least 0.5 percent of the national vote is eligible to receive a set sum. This sum has increased over time and, beginning in January 1984, amounted to DM5 from the federal treasury for every vote cast for a particular party in a Bundestag election. Parties at the Land level receive similar public subsidies. The political parties receive free campaign advertising on public television and radio stations for European, national, and Land elections. Airtime is allotted to parties proportionally based on past election performance. Parties may not purchase additional time.

Article 21 of the Basic Law places certain restrictions on the ideological orientation of political parties: "Parties which, by reason of their aims or the behavior of their adherents, seek to impair or abolish the free democratic basic order or to endanger the existence of the Federal Republic of Germany, shall be unconstitutional. The Federal Constitutional Court shall decide on the question of unconstitutionality." This provision allowed for the banning of the neo-Nazi Socialist Reich Party in 1952 and the Communist Party of Germany (Kommunistische Partei Deutschlands--KPD) in 1956.

However, such a ban from participation in the country's political life is not automatically forthcoming in any sense. Should the Federal Government consider a ban to be appropriate because such parties pose a threat to the democratic system, it can only petition for such a ban. Any such ban may only be enacted by the Federal Constitutional Court after duly considering the individual case. The idea is to prevent the ruling parties simply banning those parties who might prove awkward in the fight for votes. The parties in government prefer to combat undemocratic parties in the everyday political arena through political debate on the issues at hand. In the history of the Federal Republic there have been few banning processes, and even fewer parties have actually been banned. Though the Basic Law accords political parties some privileges, these are, basically, means for society to express itself. They take full responsibility for failing at Elections, a loss of members, or strife in conjunction with personnel and factual issues.

Several events, including a party-financing scandal in the early 1980s and an electoral campaign in Schleswig-Holstein marked by dirty tricks in the late 1980s, have contributed to increased public distrust of the parties. A 1990 poll showed that West Germans, in ranking the level of confidence they had in a dozen social and political institutions, placed political parties very low on the list. Although only 3 to 4 percent of voters were members of a political party, all the major parties experienced a decrease in party membership in the early 1990s, possibly a result of the increased distrust of political parties. SPD membership fell by 3.5 percent in 1992 to 888,000. At the end of the 1970s, the party had had more than 1 million members. CDU membership fell by 5 percent in 1992 to 714,000, while that of the FDP fell by about one-fifth to 110,000.

Over time, the smaller parties faded from the scene. From 1962 to 1982, the Bundestag contained representatives from only four parties: the CDU, the CSU, the SPD, and the FDP. The Greens gained enough of the national vote to win seats in 1983, and unification brought additional parties into the Bundestag in late 1990. At the federal level, the CSU coalesces with the CDU, the largest conservative party. The SPD is the major party of the left. The liberal FDP is, typically, the critical swing party, which can form a coalition with either the CDU/CSU or the SPD to create the majority needed to pass legislation in the Bundestag.

Christian Democratic Union/Christian Social Union (CDU/CSU). An important aspect of postwar German politics was the emergence of a moderate, ecumenical Christian party--the Christian Democratic Union (CDU)--operating in alliance with a related Bavarian party, the Christian Social Union (CSU). Although each party maintains its own structure, the two form a common caucus in the Bundestag and do not run opposing campaigns. The CDU/CSU has adherents among Catholics, Protestants, rural interests, and members of all economic classes. It is generally conservative on economic and social policy and more identified with the Roman Catholic and Protestant churches.

Social Democratic Party (SPD). The SPD is one of the oldest organized political parties in the world. It originally advocated Marxist principles, but in the 1959 Godesberg Program abandoned the concept of a "class party" while continuing to stress social welfare programs. Under the leadership of Gerhard Schroeder, the SPD-Greens government implemented in 2003 the centrist Agenda 2010 reforms, designed to modernize the country's social system and labor market. The SPD elected Franz Muentefering as chairperson on October 18, 2008 replacing Kurt Beck, who had resigned in September 2008. The SPD also chose Foreign Minister Frank-Walter Steinmeier to lead the party against incumbent Chancellor Angela Merkel's CDU in the September 27, 2009 national parliamentary elections. The SPD has a powerful base in the bigger cities and industrialized states.

Free Democratic Party (FDP). The FDP has traditionally been composed mainly of middle and upper class Protestants who consider themselves heirs to the European liberal tradition. It supports free trade and reducing the role of the state in economic policy. It is libertarian on social issues. The party has participated in all but three postwar federal governments but has not been in federal government since 1998.

The Left. The PDS (composed largely of former East German communists) and the WASG (composed of western leftists) merged in June 2007 to form a party simply known as "The Left." The party's foreign policy is largely shaped by its rigid opposition to foreign military deployments. On domestic policy, the party opposes economic and social reforms, such as Hartz IV, which aim to increase free markets and reduce unemployment benefits. The Left proposes to replace the free market system with a return to socialist principles.

Alliance 90/Greens. In the late 1970s, environmentalists organized politically as the Greens. Opposition to nuclear power, military power, and certain aspects of highly industrialized society were principal campaign issues. In the December 1990 all-German elections, the Greens merged with the Eastern German Alliance 90, a loose grouping of civil rights activists with diverse political views. The Greens joined a federal government for the first time in 1998, forming a coalition with the SPD.

Other parties. Because of the instability caused by the need for multi-party coalitions in the Weimar Republic, Germany's Basic Law today requires parties reach 5% of the vote to win seats in the Bundestag. In addition to those parties that won representation in the Bundestag in 2005, a variety of minor parties won a cumulative 2.7% of the vote, down from 3.0% in 2002. Several other parties were on the ballot in one or more states but did not qualify for representation in the federal Bundestag.

Oskar Lafontaine, who co-founded Germany's Left party (Die Linke) in 2007 after leaving the Social Democratic Party (SPD)in protest over business-friendly reforms by ex-Chancellor Gerhard Schröder, told weekly news magazine Der Spiegel in January 2018 that German voters had shown there was a "potential for a leftist majority" and that people were "downright asking for such an option." Lafontaine told Der Spiegel "We need a collective left-wing movement, a kind of left-wing people's party comprising the Left party, parts of the Greens and the SPD". Lafontaine, who is married to one of the Left party's parliamentary group leaders, Sahra Wagenknecht, even goes so far as to say that the "political party system we have today no longer works" and that a new order was necessary to give the left wing a chance to get into government at the federal level. The 74-year-old Lafontaine is no longer at the forefront of politics, but his wife Sahra Wagenknecht — a favorite in the nation's most popular political talk shows — is showing the ambition and gumption to lead and push through her far-left views.

Wagenknecht's rebellious streak stretches back to her childhood growing up behind the Iron Curtain. Born in the former East Germany (GDR) in the city of Jena, her father was an Iranian student and her mother worked for a state-run art distributor. Wagenknecht advocates for Germany to leave NATO and set up a new alliance that would include Russia. She denounces what she calls the "lobbycrats" in Brussels, calling for a "new EU." Wagenknecht has also made the headlines with comments that many interpreted as populist and anti-immigrant sentiment. By calling for a cap on the number of refugees and blaming Chancellor Angela Merkel for "the uncontrolled border opening," she invited comparisons with the far-right AfD.

In August 2018 the Left party's parliamentary leader, Sahra Wagenknecht, unveiled the first stage of her Aufstehen ("Stand Up") initiative. Aufstehen, however, is not a political party in itself, and it welcomes the members of other parties, including the Left, the SPD and the Greens, as well as people without party affiliation. According to Wagenknecht, the movement is meant to rally left-wing voters and pressure politicians to create a majority that would result in a left-wing government. It also aims to win over the "protest voters" who currently support populist parties such as the right-wing Alternative for Germany (AfD). "This is about courage to overcome the neoliberal mainstream, about a social policy in the interest of the majority," Wagenknecht told the online portal Nachdenkenseiten.de. "The globalization steered by corporations, the disintegration of the welfare state, an endless string of new wars — this not a force of nature. There are alternatives to it and we want to give people back the hope that politics can be changed."

A poll ordered by the Focus magazine showed that more than a third of German voters "could see themselves" voting for Aufstehen if the movement transformed into a political party. The response was overwhelmingly positive among the Left voters, where 87 percent were open to supporting her initiative at the polls.

Germany's system of mixed-member proportional (MMP) representation has been used since the Federal Republic was founded in 1949 and was later carried over into reunified Germany. Back in 1949, fears — and fresh memories — of a fragmented party system and political instability meant that a system built purely on proportional representation was off the cards. But smaller parties also opposed a straight up first-past-the-post system, as it would make winning a majority extremely difficult for them. In the end, the MMP system was deemed the right fit for post-war Germany and for decades was regarded as a model by western observers: it respects political minorities while also preventing party fragmentation. But 70 years has taken its toll on the Bundestag's waistline and Germany's Parliament is running out of buttons to undo. In theory, the Bundestag has 598 seats, half of which are filled by directly elected lawmakers. The rest are for MPs selected from candidate lists. When Germans head to the polls, usually every four years, each voter casts two votes on their ballot paper: one for the constituency representative and one for the party. Whoever receives the most votes is guaranteed a seat in the Bundestag: a direct mandate. The second vote determines the relative strength of the parties — of which there are currently seven sitting in Parliament. The parties therefore receive as many mandates in the Bundestag as they're entitled to according to their share of secondary votes. If a party wins more seats than it's entitled to, based on the share of second vote results, they are allowed to keep them. These are the "overhang" seats. Conversely, if a party receives fewer direct mandates than it is entitled to, then it is awarded the extra seats from its a party's candidate list. The aim is to maintain proportionality in the Bundestag. In the last federal election in September 2017, that resulted in a total of 111 extra seats.