(Bloomberg) -- Germany’s ruling coalition led by Chancellor Olaf Scholz imploded after months of infighting between his center-left Social Democrats, the climate-focused Greens and the pro-business Free Democrats.
The unwieldy three-way alliance was formed in 2021 with sweeping ambitions to modernize Europe’s largest economy. But the fresh start sought by Germany after 16 years under former Chancellor Angela Merkel hit a major roadblock when Russia invaded Ukraine. This triggered an energy crisis and a surge in inflation that dented the competitiveness of German industry, unsettled voters and fed support for populist parties.
Personality clashes and policy disagreements meant Scholz’s coalition struggled to confront Germany’s underlying economic challenges, including an excess of red tape, decaying national infrastructure and waning industrial competitiveness.
The government collapsed a day after the US voted to return Donald Trump to the White House, raising the prospect of renewed global trade tensions that could threaten Germany’s export markets.
Why did the coalition break apart?
Coalition unrest over next year’s budget and how to revive the lackluster economy has brewed for months. Tensions escalated on Nov. 6 after Free Democrat Finance Minister Christian Lindner refused to suspend Germany’s constitutional borrowing limit. Scholz and the Greens wanted to finance more military aid for Ukraine and a modernization of Germany’s armed forces, among other things. Lindner, a self-proclaimed fiscal hawk, refused to budge. Scholz fired Lindner before he had a chance to quit. Without the Free Democrats, Scholz lacks a majority in the lower house of parliament, or Bundestag.
Does no majority mean a snap vote?
Not quite — the process is more complicated. German chancellors don’t have the power to call an early election, which lies with the federal president, but they can try to trigger one by deliberately losing a confidence vote and then asking the head of state to dissolve the Bundestag. An election must then be held within 60 days.
That’s what Scholz wants to do. He initially said he’d call for the confidence vote on Jan. 15, allowing time for his minority government to try to ram through some final bits of legislation. This would have cleared the way for an election in March. But he quickly came under pressure to act sooner, and lawmakers eventually agreed to hold the election on Feb. 23, with a confidence vote on Dec. 16.
So who is running the country now?
For the time being, Scholz heads a minority government with the Greens. Four ministries, including finance, that were run by the Free Democrats have been reassigned, and what’s left of the coalition is trying to push forward with a number of bills. To get parliamentary approval, it will need backing from opposition lawmakers.
What will happen after the election?
A new Bundestag would have to convene its first session within 30 days of the vote. (The current assembly members remain in their roles until then.) Lengthy negotiations on forming a coalition would likely follow, since a new chancellor can only be picked if they are able to command a majority in parliament.
It’s highly unlikely that a single party will secure a majority in Germany’s increasingly fragmented political landscape. After the 2021 election, it took more than two months for Scholz to stitch together an alliance. The party that secures the most seats usually gets to name the chancellor.
What do opinion polls say?
The main opposition Christian Democratic Union led by Friedrich Merz has been ahead in the polls since mid-2022, and recent surveys suggest it would win more than 30% of seats in an election. At about 16%, the SPD is seen in third place — behind the far-right Alternative for Germany party — with the Greens in fourth at around 10%. The FDP has polled below 5%, the threshold that would be required to enter parliament. That compares with 26%, 15% and 11.5% for the ruling parties in the September 2021 election.
What would a government led by Merz look like?
The CDU and its smaller Bavarian sister party, the CSU, pursues a conservative agenda, including strict adherence to rules limiting net new borrowing. The alliance has sharpened its rhetoric on irregular migration in recent months, coinciding with a rise in support for anti-immigrant parties on the extreme right and left. The conservative bloc is a firm supporter of aid to Ukraine, fiercely pro-European Union and wants to revive Germany’s relationship with its western neighbor France that’s suffered from a personality clash between Scholz and his French counterpart Emmanuel Macron.
Who are the other main players?
- Social Democrats (SPD): Scholz’s party is center-left. It usually tries to pursue a market-oriented policy, but with more regulation than Merz’s conservatives and a stronger focus on social welfare and protecting workers rights.
- Greens: The party of Economy Minister Robert Habeck and Foreign Minister Annalena Baerbock is focused on climate protection and wants Germany to boost debt in order to finance the transformation of key industries.
- Free Democrats (FDP): Lindner’s party is pro-business and wants to slash regulation, including allowing combustion-engine cars on the roads for longer. It also fiercely opposes watering down borrowing rules and wants to cut welfare spending.
- Alternative for Germany (AfD): The far-right group wants to leave the euro, reverse regulation for climate protection and revive economic ties with Russia. Some of its key officials have made controversial comments on deporting migrants and remarks that echoed Nazi slogans.
- Alliance Sahra Wagenknecht (BSW): The party founded earlier this year by former communist Sahra Wagenknecht also wants to rebuild ties with the Kremlin and opposes plans to station US missiles in Germany. It advocates for higher taxes and wants to limit migration.
- Left: Germany’s socialist party is the most left-wing group in German post-reunification politics and is a descendant of the ruling party of former communist East Germany.
--With assistance from Iain Rogers.
©2024 Bloomberg L.P.