Germany’s three-way coalition, the “traffic light” alliance of centre-left Social Democrats (SPD), Greens and free-market liberal Free Democratic party (FDP), has collapsed after three years, following a lengthy dispute over how to stop a multibillion-euro hole in next year’s budget, plunging Europe’s largest economy into a period of considerable uncertainty.
What just happened in Berlin?
The chancellor, Olaf Scholz of the SPD, sacked his finance minister, Christian Lindner, the FDP leader, on Wednesday night after months of disagreement over how to deal with the gaping hole in Germany’s budget.
Scholz wants to boost spending by taking on more debt, citing the impact of Russia’s invasion of Ukraine. Lindner opposed this and insisted instead on an array of tax and spending cuts that the SPD and Greens said were impossible to accept as they would torpedo much of the government’s programme. At stake: welfare payments, climate emergency measures and support for Ukraine (Germany is its second biggest backer after the US).
Whether Scholz called Lindner’s bluff by sacking him before he walked is up for discussion. Both men have vented their anger towards each other, with Scholz accusing Lindner of being “small-minded” and “egotistical” and failing to see the bigger picture – namely huge geopolitical challenges. Lindner accuses Scholz of “trivialising” the concerns of ordinary Germans.
What happens now?
Federal elections scheduled for next autumn are likely to be shifted forward by about six months, to March or April.
Scholz has tabled a vote of confidence for 15 January but Friedrich Merz, the leader of the opposition conservative Christian Democratic Union (CDU) and favourite to take over the chancellery, is calling for it to take place as early as next week.
Whenever it is held, the government is expected to lose. This would then pave the way for the president, Frank-Walter Steinmeier, to dissolve the Bundestag within 21 days. A new election would have to take place at the latest two months later. On Scholz’s timetable that would be by mid-April; on Merz’s it would be much sooner.
The chancellor and his cabinet would then stay in office until the formation of a new coalition.
Scholz has signalled that he wants to deliver on his most important projects, such as stabilising the pension system. However, as the head of a minority government he would be reliant on support from the conservative opposition who could choose to make his life very difficult.
The 2025 budget remains up in the air, requiring a possible emergency budget from January that would be limited in its scope.
Could Scholz lead a minority government?
Yes, in fact that is essentially what he is doing now, as after Lindner’s exit the FDP pulled out its other ministers, too. (One, the transport minister, Volker Wissing, left the FDP to stay in the government.) The question is for how long such an arrangement between the SPD and the Greens may limp on.
In theory, that could be until September but no one – not even Scholz – is talking about that as a possibility. Such a government would also effectively be a lame duck, a status that would not be good for Germany on the international stage, as Europe seeks to forge a new transatlantic alliance, and amid other challenges, not least dealing with the threat from Russia.
What went wrong for the government?
When the three-party coalition formed in 2021, it was widely believed that the alliance would be difficult to sustain, even in a country that mostly wanted to turn the page on the Angela Merkel era. Then Russia launched its full-scale invasion of Ukraine, Germany’s cheap supply of Russian gas was history, energy prices and the cost of living shot up, and Berlin had to hugely increase defence spending.
More recently, the prospect of a Trump presidency has added to the sense that a strong and unified government is urgently needed to give new impetus to an ailing economy and to unite an increasingly divided nation at a time when populism – in the form of the far-right Alternative für Deutschland (AfD) and the anti-immigration leftist Sahra Wagenknecht Alliance (BSW) – is making gains.
What are the polls saying about the next election?
The opposition CDU/Christian Social Union (CSU) conservative alliance is clearly leading the polls, which were last updated before the government’s collapse, with 30-34%. Behind them is the AfD (16-19%).
The governing parties’ poll ratings have all plummeted from 2021 levels. Scholz’s SPD is on 14-18%, while the Greens are on 9-12% and the FDP just 3-5%. To get into parliament a party needs at least 5% of the vote and this is seen as one of the reasons that Lindner decided to upend the coalition. He is expected to present his party as a future potential partner for the CDU/CSU.
The BSW, which recently made a significant impact in three state elections, is on 6-9% and is seen, albeit with misgivings, as a potential coalition partner by all the main parties. They have all excluded the possibility of working with the AfD.
Pollsters say the government’s collapse could have a considerable impact on these numbers. However, at the moment the most obvious constellation for a new government, with the conservative alliance unlikely to achieve a big enough majority to govern alone and its most obvious partner, the FDP, potentially not even capable of getting into parliament, would be a Merz-led grand coalition of the conservatives and SPD.
Such administrations are popular with German voters, even though politicians view them as cumbersome and unwieldy.
