German chancellor Olaf Scholz is under mounting pressure from opposition parties and business groups to call for early elections after his three-party coalition collapsed on Wednesday.
The political crisis started after Scholz fired finance minister Christian Lindner, leader of coalition party Free Democrats (FDP), over obstruction from Lindner on budget measures. Scholz wanted to ease debt limits as a way to increase by €3 billion German aid for Ukraine in 2025.
After Lindner’s dismissal from the ministry, his party left the coalition government, now solely in the hands of Scholz’s SPD and the Greens. The two parties have a minority government that will have to rely on impromptu majorities to support any substantial piece of legislation. For the moment, Scholz picked Joerg Kukies from the SPD as the new finance minister.
Scholz plans on holding a confidence vote in January, knowing that he will probably lose it, in order to hold elections in March, six months ahead of the scheduled date in November 2025. However, his intentions have come under fire by oppositions and interest groups, with several of top German companies urging Scholz for a snap elections. Among others, Deutsche Bank, Munich Re, plus German business association groups BDI, pharma and chemical lobby group VCI and car lobby group VDA spoke about the need for a quick resolve of the crisis via elections.
The new leader of centre-right conservatives CDU Friedrich Merz called for an immediate vote of confidence, a sentiment shared by other opposition leaders. Merz pointed out that an election could take place in late January. He told reporters that “we simply cannot afford to have a government without a majority in Germany for several months now, followed by an election campaign for several more months and then possibly several weeks of coalition negotiations.”
German economy is currently in turmoil with a second negative year most likely and structural issues to be taken care of. The political uncertainty may lead to a standstill in consumption and investments. Already some effects are being seen, with German borrowing costs jumping at their highest since July.
