On Wednesday, November 6th, German Chancellor Olaf Scholz fired his finance minister Christian Lindner, plunging Europe’s largest economy and the country’s future into considerable uncertainty. The decision came hours after Donald Trump’s US election victory, with Scholz stating his decision was a consequence of persistent rifts on spending and economic reforms. Internal tensions had been sizzling for weeks before exploding on Wednesday night as the coalition disagreed over the 2025 budget. With competing economic views among the coalition and Germany now facing its second year without economic growth (International Monetary Fund (IMF) downgrading Germany to zero growth for 2024), tensions reached an all-time high before exploding.
Lindner’s unexpected sacking has left Scholz heading a minority government with his Social Democrats (SPD) and the Greens (Alliance 90/Greens), now having to rely on cobbled-together parliamentary majorities to pass legislation. Subsequently, he is expected to hold a parliamentary confidence vote on January 15 which has the potential of triggering snap elections by the end of March. This article will explore the detailed causes that led to the collapse of the coalition as well as what this means for Germany’s future.
The “Traffic Light” Alliance:
The so-called Traffic Light Coalition was formed in 2021 after Scholz’s Social Democrats narrowly defeated the conservatives (CDU/CSU) in the federal elections of September 2021. The name of the coalition stems from the colours which represent the 3 parties forming the alliance: the Social Democratic Party (SPD) led by Olaf Scholz with a centre-left stance, the Greens with a stance leaning towards green politics and social pluralism and finally the Free Democratic Party (FDP) with centre-right stance.
In the Coalition Contract, they vowed to “Make more progress – an alliance for freedom, justice and sustainability” with their priority being a comprehensive restructuring of the EU economy and energy supply in order to achieve climate goals. Despite the coalition’s supposed collective aims for progress, over the past years, many disagreements have surfaced over climate policy, state spending and debt reduction. Particularly, the war in Ukraine triggered energy prices and coalition tensions to surge.
Parties of the coalition had different approaches to economic spending. Scholz’s SPD proposed capping costs for companies in order to boost Germany’s appeal as a location to do business, packages to help save jobs in the weakening auto industry and increased aid to Ukraine. More specifically, Government sources said Scholz had wanted to increase the Ukraine support by 3 billion euros, reaching a total of 15 billion euros which would be financed by suspending the debt brake. In contrast, the Free Democratic Party (FDP) had proposed public spending cuts, lower taxes and less regulation with Ukraine spending being drawn from the regular budget.
The demise of the coalition’s spending policy began in November 2023 when the Federal Constitutional Court declared parts of the government’s budget policy unconstitutional, depriving them of a viable financial plan. The Court also ruled against the government’s plans to reallocate money from a cache of debt. This money was initially taken out to mitigate the fallouts of the COVID-19 pandemic however they wished to change its purpose and use it for climate action instead (the ruling left the budget €60 billion short). Evidently, these rulings gradually exposed the rifts between the parties.
These competing ideologies led to the disagreements that amounted to the death of the coalition with Scholz expressing that “All too often, Minister Lidner has blocked laws in an inappropriate manner. Too often he has engaged in petty party political tactics. Too often he has broken my trust.” Lindner refused to ease rules to allow more Ukraine spending, he affirmed that such a move would have “violated my oath in office.” He further stated that “Olaf Scholz has long failed to recognise the need for a new economic awakening in our country. He has long played down the economic concerns of our citizens.” Lindner’s list of demands and controversial projects were suspected by some as being put forward as a provocation to get the Chancellor to dismiss him. As Scholz is the Chancellor, he could fire Lindner who assumed the role of his finance minister, regardless of what role and powers the latter played within the FDP as part of the coalition.
What is Next for Germany?
Many had hoped that Trump’s victory would force the coalition to hold together over fears that the incoming president would give Europe’s biggest economy a hard ride through possible new US tariffs to Russia’s war in Ukraine (analysis from the German Economic Institute (IW) estimated that a trade war could cost Germany €180 billion over Trump’s four years in office). However, not even the looming threat of Trump proved enough for the parties to put their differences aside.
Given the present situation, federal elections which were initially scheduled for next autumn are likely to be shifted forward by six months to March or April. Scholz has scheduled for the vote of confidence in the Bundestag to take place on January 15 2025, however, the leader of the opposition and favourite to take over the chancellery Friederich Merz has called for the vote to take place as early as next week.
No matter when the vote takes place, the present government is expected to lose. Upon this outcome, President Frank Walter Steinmeier will dissolve the Bundestag within twenty-one days and new elections would have to take place at least two months later. The dissolution of the Bundestag and the vote of confidence are outlined in Article 68 of the German Basic Law: “If a motion of the Federal Chancellor for a vote of confidence is not supported by the majority of the Members of the Bundestag, the Federal President, upon the proposal of the Federal Chancellor, may dissolve the Bundestag within twenty-one days. The right of dissolution shall lapse as soon as the Bundestag elects another Federal Chancellor by the vote of a majority of its Members.” Early elections can thus only take place if Scholz loses the parliamentary vote of confidence.
Scholz has signalled that he wishes to deliver on his most important promises (heavier focus on climate change and tougher stances towards countries like China and Russia), however, as the Head of the minority government this would prove difficult as he would have to rely on support from the conservative opposition. Currently, the polls are showing that the Conservative Opposition (CDU/CSU) is leading in public support with 30-34% while Scholz’s SPD is on 14-18%. At the moment, the most likely structure for a new government would be a Merz-led coalition of the conservatives and the SPD (the conservatives are unlikely to gain a big enough majority to govern completely alone and the FDP have low prospects of even getting back into the Parliament). Thus Germany’s political future remains uncertain as the situation continues to develop with announcements that the confidence vote is set to take place on December 16th and the predicted elections being moved forward to February 23.
