Christian Lindner's removal prompted him to withdraw his Free Democrats Party (FDP) from the coalition with Scholz's Social Democratic Party (SPD), which left Scholz in a minority government alongside the Green Party.

Scholz announced that he would call a confidence vote on 15 Jan 2025. If he loses the vote, this could pave the way for elections to be held by the end of Mar 2025, six months earlier than the previously planned date of Sep 2025.

Germany is now facing political turmoil amid a broader climate of uncertainty. This crisis was ignited just hours after the announcement of former US President Donald Trump securing a second term, which could lead to further challenges for Germany's economy and threaten Europe's united stance on key issues.

Political stability is the norm in Germany, with power primarily alternating between the Social Democratic Party (SPD) and its conservative rival, the Christian Democratic Union (CDU). The country’s previous leader, Angela Merkel, held the chancellorship for 16 years and maintained a prominent position on the European stage while other leaders came and went. She was known for her challenging relationship with Donald Trump.

Germany's last snap election was in 2005. It was called by then-Chancellor Gerhard Schröder, who ultimately lost to Merkel.

Merkel retired from her position as German chancellor in 2021.

After her departure, the centre-left SPD emerged as the largest party in Germany’s parliament, the Bundestag, following the 2021 federal election. Succeeding a long-serving and popular leader like Merkel always comes with challenges.

The SPD formed a government in coalition with the Free Democratic Party (FDP) and the Greens, referred to as a "traffic light" coalition since December 2021, named after the parties' respective colours.

Bringing together three ideologically different parties into one coalition has not always been easy, and the SPD-led coalition has faced challenges from the outset.

This alliance comprises the FDP, a business-oriented party that champions a free market and a fiscally conservative approach, alongside the SPD and the Greens. These two left-wing parties advocate for government spending on social and environmental policies.

The coalition has struggled over how to revive Germany's economy and has faced pressure from the rise of far-right and, more recently, far-left forces.

The Alternative für Deutschland (AfD) has made significant gains in recent years, becoming the first far-right party to win a state election since the Nazi era in September, when it emerged as the strongest party in the eastern state of Thuringia.

Chancellor Scholz's government has taken action on migration to counter the AfD, announcing new security measures aimed at expediting the deportation of rejected asylum seekers and strengthening border controls.

Months of tension over Germany’s budget policy and economic direction reached a breaking point on Wednesday. Chancellor Olaf Scholz's demand for increased investment clashed with Finance Minister Christian Lindner's more cautious approach to government borrowing.

Scholz stated that he fired Lindner for obstructing his economic plans, saying, "Lindner showed no willingness to implement any of our proposals" and, as a result, "there is no trust basis for any future cooperation." In response, Lindner accused Scholz of asking him to suspend the "debt brake," a constitutional provision designed to prevent excessive government borrowing and debt accumulation—something Lindner was not willing to do.

The rhetoric exchanged between Scholz and Lindner was unusually sharp. The Chancellor remarked that Lindner's "egoism is incomprehensible."

Additionally, the pressing issue of how to address next year’s budget, which has a multi-billion-euro deficit, looms over the government. The absence of the Free Democratic Party (FDP) complicates the matter further.

Carsten Brzeski, a senior economist at Dutch bank ING, pointed to "never-ending tensions" within the German government and "clear disagreement on how to revive the German economy from its current stagnation and structural weaknesses" as critical factors leading to the collapse of cooperation.

Germany, the largest European economy, contracted last year for the first time since the COVID-19 pandemic began.

Over the past five years, Germany's economy has grown by only 0.2%, while the 20 countries that use the euro saw a growth of 4.6%. France registered a growth of 4.1%, and Italy experienced a 5.5% increase during the same period.

Several factors contribute to Germany's economic stagnation. The lingering effects of the energy crisis, triggered by Russia's war in Ukraine, have severely affected energy-intensive industries. Additionally, Germany faces structural issues such as high labour costs, a rapidly ageing population, excessive bureaucracy, and outdated physical and digital infrastructure.

The country is also facing stiff competition from China in manufacturing some of its main exports, which has significantly impacted Germany's renowned automobile industry. For the first time in its 87-year history, Volkswagen, Germany's largest manufacturer, contemplates factory closures within its home country.

Chancellor Scholz is expected to lead a minority government, so he must rely on various parliamentary coalitions to pass legislation until the scheduled vote of confidence on January 1, 2025.

In the short term, he will likely seek support from Friedrich Merz and the Christian Democratic Union (CDU), Germany’s most popular party, to facilitate the passage of legislation.

However, the CDU leader, Friedrich Merz, has expressed that waiting until early next year for a confidence vote is too long. He has called for the vote to occur by the beginning of next week “at the latest.”

The collapse of the governing coalition and the resulting political uncertainty may increase support for far-right parties as more people lose faith in mainstream political options. Alice Weidel, the leader of the far-right party, has characterised the coalition's collapse as a "liberation" for Germany.

"The end of the traffic light coalition liberates our country. The end of the self-proclaimed ‘progressive coalition’ that brought Germany to the brink of economic ruin was long overdue," Weidel wrote on X.

07 Nov 2024