German Chancellor Olaf Scholz fired Finance Minister Christian Lindner yesterday, collapsing his three-party governing coalition. He also announced that he would submit to a vote of confidence on Jan. 15 that he is widely expected to lose, paving the way for early federal elections, likely in March. (Washington Post)
This collapse has been a long time coming. There have been tensions within Germany’s Ampelkoalition, or traffic light coalition—a reference to the three parties’ colors—essentially since it took power in 2021.
The latest sticking point, which ultimately led to the collapse, has been negotiations over next year’s budget, which currently faces large gaps. Scholz’s Social Democrats, or SPD, and the Greens favor relaxing the country’s “debt brake”—which limits the country’s public deficit and is enshrined in the constitution—in order to fund more public investment and aid to Ukraine. But the market-friendly Free Democrats, of which Lindner is the party leader, ardently opposed such a move.
The impasse led to political paralysis at a time when Germany’s economy has stagnated and is expected to shrink for the second year in a row in 2024. Germany is also particularly vulnerable to the EU-wide shift toward a tougher approach on trade with China, given its export-driven economy’s outsize reliance on the Chinese market.
With these mounting challenges, it’s likely that Germany needs the political clarification that elections could bring. But in the meantime, the Ampelkoalition’s collapse will only result in more uncertainty. Scholz now leads a minority government with little if any room to maneuver, accentuating the existing paralysis.
That leaves Berlin, historically a major force in intra-EU policy debates, greatly weakened at a time when the bloc urgently needs to address a range of economic and security issues, including relations with China, the green transition and Russia’s war in Ukraine. And the election on Tuesday of former U.S. President Donald Trump to a second term will only complicate matters, since he is broadly expected to downgrade relations with Europe and potentially cut off aid to Ukraine.
Normally, Germany and France would lead the EU’s response to major challenges like these, but both are now facing domestic political instability that has forced their leaders to turn inward. That leaves a gap for other EU forces to fill. In principle, that could mean greater freedom of action for European Commission President Ursula von der Leyen, who has pushed for Brussels to play a more influential role on the geopolitical stage. But the EU’s working mechanisms make it unlikely that Brussels might take on such a leading role unilaterally.