Blog by: Tarik Oran, Team Leader German Monitoring and Political Consultant for Transport and Labour and Social Affairs; Vera Bibas, Political Consultant for Health and Environment; Julia Brandkamp, Political Consultant for Energy, Industry and Trade.
In recent weeks, deep divisions over budget policy and fiscal responsibility within the German government have reached a critical juncture. The tipping point was the leak of a policy paper by Federal Minister of Finance Christian Lindner on November 1, the week before discussions on the federal budget were scheduled. This signified the growing rift between Lindner’s FDP and its coalition partners, the Social Democrats and the Greens.
On November 6, the day Donald Trump was re-elected as President of the United States, the coalition convened in a crisis meeting to address the most pressing issues. Chancellor Olaf Scholz and his party proposed a support package for the German economy alongside increased aid to Ukraine. However, to realise his plans, he called for the suspension of the “debt brake” —a rule limiting deficit spending. This idea, supported by the Greens, has been fiercely opposed by the FDP. After intense discussions, during which Lindner remained insistent on the re-implementation of the brake and leaked reports about potential snap elections, Scholz dismissed the finance minister.
No trust for future cooperation
In a press statement that followed, the Chancellor explained that “there is no trust basis for any future cooperation.” He initially announced plans to call for a vote of confidence on January 15, 2025, which would have resulted in federal elections at the end of March. Until then, he would have continued to govern with the Greens and seek potential cooperation with the Christian Democratic Union (CDU) and Christian Social Union in Bavaria (CSU), the biggest opposition party.
The FDP Minister of Justice, Marco Buschmann, and Minister of Education, Bettina Stark-Watzinger, subsequently requested their dismissal from their positions, finalising the break of the coalition. Their colleague Volker Wissing decided to remain in his position as Minister of Transport but consequently left the FDP party. The Green Ministers Robert Habeck and Annalena Baerbock expressed their regret over the collapse of the government and affirmed that they would continue to fulfil the responsibility of their posts.
To fill the gaps in his cabinet, Scholz appointed Jörg Kukies, former advisor to the chancellor, as the new Minister of Finance. Wissing became Minister of Justice, in addition to his role as Minister of Transport, whilst Cem Özdemir, the Green Party’s Minister of Agriculture, will assume responsibility for the Ministry of Education.
On November 7, CDU chair Friedrich Merz called on Scholz to face a vote of confidence by the end of the following week, which would have led to elections in mid-January. He argued that Germany could not afford a government without a parliamentary majority in such critical times. The CDU assured that they would consider supporting some of the remaining legislative projects of the government if elections were held earlier. By pushing for earlier election, Merz aimed to capitalise on his momentum (currently leading with approximately 33% in the polls), before giving the SPD or the Greens a chance to recover from their polling slump.
Faced with pressure from all sides, Scholz entered negotiations with the CDU on Tuesday, November 12 to schedule earlier snap elections. Considering logistical concerns, they agreed to hold federal elections on February 23, 2025. Scholz will, therefore, seek a vote of confidence on December 16, 2024.
Coalition dissolved – what’s next?
With the coalition now dissolved, the SPD and the Greens face the daunting task of operating as a minority government. Since the budget negotiations were not concluded before the collapse of the coalition, a provisional budget management will likely take effect on January 1, 2025, halting the financing of any new projects. Realising some of the remaining projects, such as health care legislation and the “Wachstumspaket” will also prove difficult. The latter is urgently expected by the industry as it intends to tackle the current economic challenges.
Any legislation not passed before the year’s end risks being shelved indefinitely since unapproved bills cannot be carried over into the next legislative term. This could be avoided for bills that are already undergoing the parliamentary process if Scholz can secure ad-hoc support from parties. However, so far, CDU/CSU and SPD have only agreed to pass a law for the better protection of the Federal Constitutional Court against extremists. It is possible to pass only parts of existing draft bills and to discuss less urgent regulations in the next legislative period or even attach selected regulations to larger, less controversial legislative projects in the so-called omnibus procedure.
However, with the elections now taking place in February, Scholz’s government will operate as a mere “caretaker” government from mid-December onwards, limiting its capacity to “urgent matters” from that point. This will make it challenging to showcase any tangible achievements that could be built on in the election campaigns. Moreover, the new timeline could heighten tensions within the remaining coalition parties, as internal disagreements could be magnified due to the urgency to launch the campaigns.