Olaf Scholz calls crisis meetings to salvage Germany’s warring coalition

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Chancellor Olaf Scholz has summoned his economy and finance ministers to a series of crisis meetings aimed at saving Germany’s increasingly raucous coalition government.

Relations between Scholz’s Social Democrats (SPD) and their coalition partners — the Greens represented by economy minister Robert Habeck, and the liberals (FDP) led by Christian Lindner, finance minister — have plummeted to new depths in recent weeks. The falling-out comes ahead of fraught negotiations on next year’s budget that many in Berlin fear could lead to a break-up and early elections.

In recent days, Germans have watched in bafflement as Lindner and Scholz held rival summits to discuss the country’s economic woes, while the finance minister and Habeck produced competing reform blueprints with diametrically-opposed proposals that most observers believe have no hope of being implemented.

Meanwhile, MPs from the three parties are still at a loss as to how to plug a €9bn budget gap with a November 14 deadline for passing the spending plan fast approaching.

Scholz’s spokesman Steffen Hebestreit said on Monday that ministers were “working flat out” to come up with a solution to the budget impasse and so save the coalition.

“For the chancellor the clear priority is to strengthen the German economy, safeguard jobs and finalise the 2025 budget,” Hebestreit said. 

He said there would be “several meetings” this week between Scholz, Habeck and Lindner, ahead of a crucial confab of coalition party leaders on Wednesday that could presage the end of their alliance.

Hebestreit insisted that the government would serve out its full term until elections scheduled for September — a scenario many politicians and commentators in Berlin now discount.

Carsten Brzeski, an analyst at ING, described German politics as a slow-motion train wreck. “The German government has just entered a new stage of slow-burning political crisis that could be the last step before the eventual collapse of the governing coalition,” he wrote in a note.

In the past few days, Habeck and Lindner have presented competing proposals for fixing Germany’s economy, which is facing its first two-year economic slump since the early 2000s.

Business leaders say they have only deepened confusion about the direction of Scholz’s economic policy.

“What we’re seeing is a coalition that is completely dysfunctional, where there’s no agreement on any relevant issue,” said Thorsten Frei, a senior MP with the opposition CDU.

Habeck’s plan envisages a new debt-financed fund to stimulate investments — a proposal that the finance minister and his party have rejected.

Lindner’s rival plan, which was leaked last Friday, calls for tax cuts, an immediate moratorium on new regulation and an easing of Germany’s climate goals — ideas that are anathema to the FDP’s partners.

“I didn’t find a single proposal there that would be suitable for implementation,” said SPD co-leader Saskia Esken.

Lindner’s paper was reminiscent of a letter sent by the then-FDP economy minister Otto Graf Lambsdorff to the SPD chancellor Helmut Schmidt in 1982 advocating a series of economic reforms that went against the grain of SPD policy. The letter, often referred to as the “FDP divorce papers”, was swiftly followed by the collapse of the Schmidt government.

A spokesman for Lindner dismissed the comparison. “These are policy proposals that concern the budget and how to make the economy more dynamic,” he said. “They will now be openly debated in the coalition.”

Insiders say the likelihood is growing that Lindner’s FDP leaves the coalition before November 14. If the budget is not adopted, an emergency procedure could be applied to allow for tax and spending to be carried over into 2025.

Scholz could then try to soldier on as leader of a minority government until next year, or table a confidence vote in parliament, which, if he loses, would pave the way for early elections.