The ruling coalition in Germany collapsed on Wednesday, with Chancellor Olaf Scholz dismissing his finance minister and paving the way for early elections, sparking political chaos in Europe’s largest economy hours after Donald Trump won the US presidential elections.
After the dismissal of Finance Minister Christian Lindner from the Free Democrats, Schulz is expected to head a minority government that includes the Social Democrats and the Greens, the second largest party.
He will have to rely on the unanimous parliamentary majority to pass the legislation and intends to hold a parliamentary vote of confidence in his government on January 15.
The collapse of Schulz’s tripartite coalition ends months of debate over Germany’s budget policy and economic direction, with the government’s popularity declining and the forces of the extreme right and extreme left rising.
“We need a government that is able to act and has the power to make the necessary decisions for our country,” Schulz told reporters.
Schultz said he fired Lindner because of his obstructive behavior in budget disputes, and accused the minister of putting the party at the expense of the state and obstructing legislation on flimsy reasons.
The move comes a day after Republican Donald Trump was elected president of the United States, as Europe seeks to form a unified response on issues ranging from potential new US tariffs to Russia’s war in Ukraine and the future of NATO.
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The government crisis comes at a critical juncture for Germany, with a slowing economy, aging infrastructure and an ill-prepared army.
The political change could fuel growing frustration with Germany’s main parties in favor of younger populist movements, including the anti-immigrant Alternative for Germany (AfD).
With France also facing political uncertainty after early elections this year, turmoil in the EU’s two largest economies could derail efforts to deepen the bloc’s integration at a time when it faces challenges from the east and west.
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The alliance has been at loggerheads over how best to rescue Europe’s largest economy, which faces its second year of contraction and a crisis in its economic model after cheap gas from Russia ran out following its invasion of Ukraine in 2022 and amid growing competition from China. .
Schulz said he proposed capping energy costs for companies to boost Germany’s attractiveness as a place to do business. He wanted a package to help save jobs in the struggling auto industry, as well as increase support for Ukraine.
The Free Democratic Party had proposed cutting public spending, lowering taxes, and reducing regulation as a solution to the problem. It also wants to slow Germany’s transition to a carbon-neutral economy.
Speaking after Scholz, Lindner said the chancellor had tried to forcefully persuade him to break the constitutionally mandated spending limit known as the debt brake, a move Lindner, a fiscal hawk, refused to support.
“Olaf Scholz refuses to acknowledge that our country needs a new economic model,” he told reporters. “Olaf Scholz has shown that he does not have the strength to give his country a new impetus.”
Although the Social Democratic Party and the Green Party are at odds on some issues, they agree that targeted government spending is needed.
Schulz said Lindner was focused on his party’s short-term survival. He added: “Especially today, one day after an important event like the US elections, this kind of selfishness is completely incomprehensible.”
Economy Minister Robert Habeck of the Green Party said the coalition had been unable to agree on how to fill the funding gap in next year’s budget.
“I want to say on our behalf that tonight feels wrong and not right. It is almost tragic that on a day like this, Germany needs to show unity and ability to act in Europe.
(Reporting by Sarah Marsh, Andreas Reinke, Christian Kramer, Reham Al-Kousa and Thomas Escritt; Writing by Sarah Marsh, Thomas Escritt and Matthias Williams; Editing by Mark Heinrich, Matthias Williams, Gareth Jones and Rod Nickel)
