The divisions within Germany’s governing triple coalition, consisting of the Social Democratic Party (SPD), the Greens, and the Free Democratic Party (FDP), reached a climax on November 6, 2024. This collapse followed several months of disagreements and was triggered by the ousting of Chancellor Olaf Scholz’s Finance Minister Christian Lindner over his obstructive behavior regarding the 2025 budget issues, where he was accused of prioritizing party interests over national needs. Scholz indicated he would call for a vote of confidence in mid-January 2025, which could pave the way for early federal elections in March 2025.
The coalition’s collapse, known as the “Traffic Light Coalition,” resulted in Scholz’s government losing its parliamentary majority, plunging Europe’s largest economy—already suffering from a recession for the second consecutive year—into political chaos. This turmoil came just hours after Donald Trump’s victory in the American elections, raising concerns and cautious speculation about the continent’s future and its security.
Key Dimensions
The conflicts within Germany’s governing coalition, formed in 2021 under Scholz’s leadership, intensified around the measures needed to revive the faltering German economy and prepare the budget, leading to its nosedive and creating uncertainties regarding Germany’s political and economic future. Several factors can summarize these issues:
Increasing Disagreements Over Economic Policies: The FDP advocates for austerity and reduced public spending, while both the SPD and the Greens push for increased expenditure on social care and infrastructure. For instance, there was a dispute over financing energy support plans for households and businesses to cope with rising costs, which had been implemented several times since the onset of the Russian-Ukrainian war. Scholz aimed to boost spending by taking on more debt, citing the impact of Russia’s invasion of Ukraine, while Lindner opposed this, insisting on a series of tax cuts and spending reductions that the SPD and Greens entirely rejected, arguing it would undermine many government programs. Consequently, Lindner accused Scholz of leading Germany into a “phase of uncertainty,” emphasizing the necessity to ease the spending cap known as the “debt brake,” which requires the federal government to balance its budget. This system largely prevents the federal government and state governments from incurring new debts, allowing exceptions only in extreme emergencies.
Contradictory Policies on Environment and Immigration Among Coalition Parties: The FDP fears the imposition of stringent environmental policies to curb emissions and transition the economy to renewable energy, worrying about the industrial impact and rising costs, while the Greens support strict environmental measures. For example, there was extensive debate about reducing coal reliance and halting production of traditional fuel-powered cars by 2030. Regarding immigration, the FDP advocates for stricter immigration and asylum policies, while both the SPD and the Greens support more open immigration policies. For instance, the coalition was divided about accepting refugees from conflict zones like Syria and Ukraine. The stabbing incident in the German city of Solingen in August 2024, where a Syrian asylum seeker stabbed three people and injured eight others, raised serious concerns about the migration wave that has engulfed Germany since 2015.
Escalation of Disputes Over the 2025 Budget: The 2025 budget is one of the main contentious issues within the coalition. Initially presented earlier this year, it left many questions unanswered regarding a multi-billion euro funding gap. The coalition had to make tough decisions under time pressure, amidst diverging economic views and a gap created by the Constitutional Court’s ruling in late November 2023, which stated that the government could not reallocate unused emergency COVID-19 funds, amounting to about 60 billion euros, to finance climate-related policies in the 2025 budget. This led to ongoing battles within the ruling coalition on how to fund its key projects. Consequently, the SPD and Greens rejected austerity measures proposed by the FDP’s finance minister, and negotiations regarding the 2025 budget concluded with a draft sent to the German parliament, which included a gap of about 12 billion euros.
Declining Popularity of the Governing Coalition: Under Scholz’s leadership, the ruling coalition experienced a significant decline in popularity, unprecedented in the history of the Federal Republic. The conservative opposition coalition, comprising the Christian Democratic Union (CDU) and the Christian Social Union (CSU), led the opinion polls last updated just before the government’s collapse, with results ranging from 30% to 34%. The Alternative for Germany (AfD) followed with support ranging between 16% to 19%. In contrast, ratings for the ruling parties sharply fell from 2021 levels, with the SPD garnering support between 14% and 18%, the Greens between 9% and 12%, and the FDP between only 3% and 5%. Additionally, the newly formed left-wing populist party led by Sahra Wagenknecht (BSW) has recently made a significant impact in three state elections, securing support between 6% and 9%. All major parties see it as a potential partner for coalition formation, despite some reservations, while most parties exclude any possibility of working with the AfD.
Rise of the Far Right: Polls following the voters casting their ballots in the legislative elections in two eastern German states in early September 2024 showed the AfD taking first place in Thuringia for the first time in a regional election and second place in Saxony. In light of this unexpected performance, the results in the Saxony and Thuringia elections added further confusion to a continent in a state of tension and precarious stability due to the decline of traditional parties and the rise of rebellious far-right parties. The AfD’s strong performance shocked many German and European citizens, who attributed the party’s rise to the main parties’ failure to address issues that concern voters, particularly the issue of immigration, further weakening Scholz’s coalition.
Consequences of the Crisis
A variety of repercussions are likely to unfold in Germany due to the collapse of its governing coalition, summarized as follows:
Change in the Form of the Governing Coalition: The dismissal of Christian Lindner compelled the FDP to withdraw from the coalition with Scholz’s SPD, leaving the latter to govern in a minority with the Greens. Economy Minister Robert Habeck from the Greens announced that the party would not leave the government and that its ministers would remain in their positions. While two of Lindner’s FDP colleagues resigned from their ministerial roles, Volker Wissing declared his personal decision to stay on as Minister of Transport while resigning from his party.
Worsening Dilemma of the Shrinking German Economy: In 2023, the German economy, the largest in Europe, shrank for the first time since the COVID-19 pandemic began. Over the past five years, it grew by only 0.2%, compared to a growth of 4.6% in the Eurozone, 4.1% in France, and 5.5% in Italy. The German economy is likely to continue shrinking following the collapse of the ruling coalition, especially as German companies primarily relying on consumption continue to suffer from the ongoing impacts of the energy crisis ignited by the war in Ukraine, alongside the costs of hosting 1.5 million Ukrainian refugees, without resolving many structural issues in Germany, such as labor costs, an aging population, bureaucracy, and outdated material and digital infrastructure.
Increasing Need for a Strong Government: Scholz chose his ally, former Goldman Sachs investment banker and Deputy Finance Minister Jörg Kukies, to replace Lindner as Finance Minister. Trump’s ascension to the White House heightened Germany’s urgent need for a strong and unified government to rejuvenate the shrinking and stagnating economy and to unite a nation increasingly divided at a time when populists—manifesting through the far-right AfD and the left-wing anti-immigration coalition led by Sahra Wagenknecht—are gaining unprecedented traction since the Nazi era.
Scholz’s Attempt to Gain Support from Conservative Opposition Parties: Scholz is expected to lead a minority government, which will require him to rely on a cohesive parliamentary majority to pass legislation, including the confidence vote in January 2025. Until the election date, the Greens, as the second-largest party in the former triple coalition, will remain in the government alongside the SPD. Without a parliamentary majority, both parties will need to gather support for individual votes from other parties. Thus, it’s likely that Scholz will turn to Friedrich Merz, leader of the CDU, for support on urgently needed financial measures, as he recently hinted that the faltering German economy cannot wait until the elections to take governmental action. Merz believes that choosing March for early elections is too late, urging Scholz to propose a motion of no confidence within a week, which could allow for elections to be held earlier, potentially in January 2025. In this regard, the German Chancellor stated on November 10 that he is prepared to call for a parliamentary vote of confidence before Christmas, a move that could pave the way for early elections following the collapse of his governing coalition.
Ambiguity Regarding Climate and Energy Plans: Many plans, strategies, and bills at different stages of agreement are now stalled within the 2025 budget. It’s unclear whether a majority will be available in parliament to pass them. Notable among these are strategies for carbon management and climate adaptation, as well as the energy security law, which involves bidding for gas power plants to ensure that a sufficient number of gas plants are built in the coming years to secure future supply.
Continued Decline in Industrial Production and Export Rates: Data on industrial production in Germany in September 2024, prior to the collapse of the ruling coalition, showed a 2.5% decline compared to August of the same year. The September drop exceeded expert predictions consulted by Bloomberg, with the automotive and chemical sectors experiencing the most significant declines. Additionally, data from the Federal Statistical Office of Germany showed a 1.7% decline in exports during the same month. This export decline is likely to persist in the short term, especially given the prevailing uncertainty following Trump’s victory and the potential for the imposition of trade protectionist policies due to his “America First” campaign slogan and isolationist rhetoric. In this context, the German Economic Research Institute predicted that the country could lose nearly €120 billion, if not more, over four years if Trump enforces the tariffs he threatened during his campaign, as the strength of the German economy largely relies on exports.
Impact on the Unified European Stance on Urgent Issues: Undoubtedly, the extraordinary turmoil in Berlin makes the European Union increasingly lacking in leadership during a challenging time, especially as the French government faces a political crisis after elections in late June 2024 that resulted in a stalemate parliament. Simultaneously, Russia has made significant advances on the battlefield in Ukraine and continues to threaten Europe broadly. This means that the collapse of the governing coalition in Germany will somehow obstruct Europe’s ability to unify its stance on multiple issues, including the likelihood of the US imposing new tariffs under Trump’s presidency, ongoing Russian territorial gains in its war in Ukraine, and the uncertainty surrounding NATO’s future.
Decline in Berlin’s Regional Standing: The instability of the German government may adversely affect Germany’s capacity to lead European policies, especially concerning energy and defense policy, where Germany has become an active hub. Additionally, the rise of the far right and the AfD, in particular, may economically harm Germany by deterring foreign capital and the necessary foreign labor to fill the widespread labor shortages.
A Murky Future
Overall, the collapse of Germany’s governing coalition indicates a new era of political instability in the country, where far-right and far-left populist parties are gaining popularity in a fractured political landscape. In light of this, traditional German parties should reevaluate their policies and the mistakes that have cost them voter trust to prevent European societies from falling into an unending spiral of extremism driven by the rise of far-right populism, which will inevitably create significant challenges for democracies in Europe.
As the leader of a minority government, it is likely that Scholz will rely on support from conservative opposition on certain issues—especially aid for Ukraine, military reconstruction, and immigration elimination—to find common ground. He may also offer some concessions to meet conditions likely to arise to settle the agreement on an emergency budget as long as the 2025 budget remains in limbo, especially since Scholz’s government will be a “lame duck,” a situation that would not be beneficial for Germany on the international stage as Europe seeks to forge a new transatlantic alliance amid other challenges, such as addressing the threats posed by Russia.
