Germany's mainstream conservatives have won the country's national election, while a far-right party surged to become the country's second-largest party.

Outgoing German chancellor Olaf Scholz conceded the election and decried the historic gains of the far-right conservative party, AfD. Early exit polls show AfD is headed for second place, while opposition leader Friedrich Merz’s conservatives are in the lead and Scholz’s party fell to third.

The leader of the far-right Alternative for Germany (AfD), the second largest party in parliament after Sunday's election, said Germany's likely next chancellor would be held hostage by left-wing parties that would seek to loosen tough fiscal rules.