Germany's Scholz calls snap election as coalition government collapses

The announcement comes after the Chancellor sacked his minister of finance

German Chancellor Olaf Scholz on November 6. Reuters

German Chancellor Olaf Scholz called a snap election on Wednesday evening after his sacking of the country's finance minister, which caused the collapse of the coalition government.

Finance Minister Christian Lindner of the Free Democrats party was sacked earlier in the day, removing the party from the coalition and leaving Mr Scholz to lead a minority government with his Social Democrats and the Greens, the second-largest party.

Mr Scholz plans to hold a parliamentary confidence vote in his government on January 15, relying on cobbled-together parliamentary majorities to pass legislation.

The collapse of Mr Scholz's three-way alliance caps months of wrangling over budget policy and Germany's economic direction, with the government's popularity sinking and far-right and far-left forces surging.

"We need a government that is able to act, that has the strength to make the necessary decisions for our country," he told reporters.

Scholz accuses finance minister of blocking legislation

Mr Scholz said he fired Mr Lindner for his obstructive behaviour on budget disputes, accusing him of putting party before country and blocking legislation on spurious grounds.

The move comes a day after the election of Republican Donald Trump as US president, with Europe rushing to form a united response on issues ranging from possible new US tariffs to Russia's war in Ukraine and the future of the Nato alliance.

The government crisis comes at a critical juncture for Germany, with a flatlining economy, ageing infrastructure and an unprepared military.

A political shake-up could fuel growing frustration with Germany's mainstream parties to the benefit of younger populist movements, including the anti-immigrant Alternative for Germany (AfD).

With France also facing political uncertainty after snap elections this year, turmoil in the EU's two largest economies could hamper efforts to deepen the bloc's integration at a time when it is facing challenges from east and west.

Government at odds on how to rescue the economy

The coalition has been at odds over how best to rescue Europe's largest economy, which is facing its second year of contraction and a crisis in its economic model after the end of cheap gas from Russia since its 2022 invasion of Ukraine, and amid increasing competition from China.

Mr Scholz said he had proposed capping energy costs for companies to bolster Germany's appeal as a place to do business. He wanted a package to help save jobs in the ailing motor industry, as well as increased support for Ukraine. The FDP had proposed public spending cuts, lower taxes and less regulation as the answer to the malaise. It also wants to slow Germany's shift to a carbon-neutral economy.

Speaking after Mr Scholz, Mr Lindner said the chancellor had tried to force him to break a constitutionally enshrined spending limit known as the debt brake, a move that Mr Lindner, a fiscal hawk, refused to support.

"Olaf Scholz refuses to recognise that our country needs a new economic model," he told reporters. "Olaf Scholz has showed he doesn't have the strength to give his country a new boost."

The SPD and the Greens, while at odds on some issues, agree that targeted government spending is needed.

Mr Scholz said Mr Lindner was focused on the short-term survival of his own party. "Especially today, one day after such an important event as the US elections, this kind of selfishness is utterly incomprehensible."

Economy Minister Robert Habeck of the Greens said the coalition could not agree on how to plug a funding gap in the budget for next year.

"I want to say on our behalf that tonight feels wrong and doesn’t feel right. It’s almost tragic on a day like today, when Germany needs to show unity and capacity for action in Europe," Mr Habeck said. "Germany will have a new decision to make for the next government coalition.

"Until then, we remain in office, and we are firmly committed to fully fulfilling the duties of office, providing stability from within the government, which Germany can and must offer Europe."