A swift election can end Germany’s political paralysis

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

After nearly three years in office, Germany’s governing coalition collapsed on Wednesday in the way it knows best — acrimony. The Social Democrat chancellor, Olaf Scholz, fired his liberal Free Democrat finance minister, Christian Lindner, for refusing to back extra borrowing to support Ukraine, strengthen Germany’s defence and rescue its industry from a deepening slump. These crises would become more acute with Donald Trump’s return to the White House, Scholz argued, backed by economy minister Robert Habeck of the Greens. Scholz said Lindner was irresponsible and small-minded; Lindner said the chancellor was weak.

With partners like these, who needs enemies? The red-yellow-green “traffic light” coalition was not always so rancorous. It started off with modernising ambition, agreed a “watershed” increase in defence spending after Russia’s invasion of Ukraine and weaned German industry off Russian fossil fuels with minimal disruption. Money papered over the ideological cracks.

When the constitutional court ruled against the coalition’s off-budget spending schemes for climate and energy projects in November 2023, however, the money ran out and the divisions opened up, playing out in public view. Scholz failed to provide leadership. The coalition became possibly the most dysfunctional the federal republic has seen and certainly the most unpopular.

Meanwhile, Germany’s problems have worsened: industry is in recession, the rearmament plan has run out of steam, aid to Ukraine next year is being cut in half. Fuelled by voter anger at government impotence, support for the far right has surged.

The implosion of the coalition is both a blessing and a curse. Snap elections could give the country a much-needed political reboot and a more coherent government capable of taking decisions. Without this reset, it is hard to see Berlin tackling its competitiveness and security challenges. And if Germany is incapable, so is the EU, such is the country’s economic and political weight.

The downside is that this is the worst possible moment for Germany to be consumed by a lengthy election campaign. It could soon be hit by punitive tariffs on exports to the US, a weakening of Washington’s security guarantees and an unfavourable peace deal imposed on Ukraine without its say. Now more than ever Berlin requires a strong voice.

On Scholz’s timetable of a confidence vote in mid-January, with elections in March, coalition negotiations may not deliver a new German government before the summer. The chancellor says this would allow time to pass a budget. But his chances of passing a budget without a Bundestag majority seem remote. Suspecting Scholz is playing for time, the opposition Christian Democrats (CDU) will not play ball. They want a confidence vote as soon as next week and an election in January. They are right. Germany’s president Frank-Walter Steinmeier should not allow Scholz’s wounded coalition to limp on.

But the CDU and its leader Friedrich Merz also face difficult choices. Germany’s EU partners, corporate chiefs and most economists struggle to see how it can revive its business model, pursue decarbonisation, strengthen its military and support Ukraine without greater private and public investment. All this will be even harder with Trump back in power. At the least, it will require exploiting the flexibility in Germany’s constitutional debt brake to borrow more for a crisis. Better still would be to change the rule altogether.

Merz, as Scholz pointed out, will also need to compromise if he becomes chancellor after the elections, as the polls indicate. Germany’s electoral system necessitates coalition government, but the country is running low on viable combinations. The traffic light, for one, will be out of service for a long time.