2024-11-07 16:33:00
By Sarah Marsh, Andreas Rinke
BERLIN (Reuters) -German opposition parties and business groups on Thursday urged Chancellor Olaf Scholz to trigger a new election quickly to minimise political uncertainty after his rocky three-way coalition collapsed.
The coalition fell apart on Wednesday when years of tensions culminated in a row over how to plug a multi-billion-euro hole in the budget and revive Europe’s largest economy, headed for its second year of contraction.
The break-up creates a leadership vacuum at the heart of the European Union just as it seeks a united response to Tuesday’s election of Donald Trump as U.S. president on issues ranging from possible new U.S. trade tariffs to Russia’s war in Ukraine and the future of the U.S.-led NATO alliance.
The chancellor said he would hold a confidence vote in January, which he would probably lose, triggering a new election by the end of March – six months ahead of schedule.
Friedrich Merz, leader of the opposition conservatives, who are leading in nationwide polls, called for a vote of confidence “by the beginning of next week at the latest”, in comments echoed by other opposition parties.
An election could take place in late January, he said.
“We simply cannot afford to have a government without a majority in Germany for several months now, followed by an election campaign for several more months and then possibly several weeks of coalition negotiations,” Merz told reporters.
German industry, reeling from high costs and fierce Asian competition, also urged Scholz’s government on Thursday to arrange an election as soon as possible.
The uncertainty caused German borrowing costs to jump, with the benchmark 10-year yield rising as much as 10 basis points to its highest since July. A key market gauge that signals debt risk as it falls dropped to its lowest on record.
Scholz delayed his departure for Thursday’s European Union summit in Budapest due to the crisis at home and cancelled his attendance at the next United Nations climate change summit.
SCHOLZ FAILS TO SECURE CONSERVATIVE SUPPORT
Scholz, of the centre-left Social Democrats (SPD), said he had fired his finance minister, Christian Lindner of the fiscally conservative Free Democrats (FDP), for obstructing a resolution of budget disputes.
The last straw was his opposition to Scholz’s plan to ease debt limits in order to increase support for Ukraine in the 2025 budget by 3 billion euros ($3.25 billion).
Lindner’s dismissal led to the FDP quitting the coalition, leaving Scholz’s SPD and the Greens running a minority government and relying on cobbled-together majorities to pass any substantial measures in parliament.
A meeting between Scholz and Merz on Thursday failed to solve the impasse, a government source said.
Joerg Kukies, a top official in the chancellery and close SPD ally of Scholz, will be named finance minister.
The crisis comes at a critical juncture for Germany, with a flatlining economy, ageing infrastructure and an unprepared military. It is likely to deal another blow to consumption and investment in coming months even as Trump’s return threatens to dampen exports, economists said.
The FDP’s exit is likely to spell the departure of the government’s transatlantic coordinator, who has spent months cultivating ties with senior U.S. Republicans in preparation for a possible Trump return to the White House.
But the crisis could also be a long-term blessing given the tensions that have plagued the coalition, the first of its kind at national level, said ING economist Carsten Brzeski.
“Elections and a new government could and should end the current paralysis of an entire country and offer new and clear policy guidance and certainty,” he said.
Still the rise of both leftist and rightist populist parties in Germany, as elsewhere in Europe, means that even a new election might not easily enable a coherent coalition with a clear majority.
“You don’t have to be a clairvoyant to deduce … that things will not automatically become easier in the future, even after the next election,” said Economy Minister Robert Habeck of the Greens.
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#Pressure #mounts #Germanys #Scholz #trigger #election #coalition #collapse #Reuters
**Interview with Dr. Anna Weiss, Political Analyst and Expert on German Affairs**
**Interviewer:** Thank you for joining us today, Dr. Weiss. The recent collapse of Chancellor Olaf Scholz’s coalition government has sent shockwaves throughout Germany and Europe. Can you explain what led to this sudden breakup?
**Dr. Weiss:** Absolutely, and thank you for having me. The collapse stems from a long-standing tension over budgetary issues, exacerbated by the economic downturn Germany is facing. Chancellor Scholz’s decision to fire Finance Minister Christian Lindner sparked a chain reaction; Lindner was opposed to Scholz’s plan to ease debt limits and allocate additional funds for Ukraine. This disagreement was not merely about party politics but reflected deeper ideological divisions on fiscal policy during a time of economic struggle.
**Interviewer:** What does this mean for the political landscape in Germany and potentially for Europe as a whole?
**Dr. Weiss:** The political vacuum could destabilize not only Germany but also the European Union, especially as the bloc grapples with external pressures like the recent U.S. elections. With Scholz’s current coalition falling apart, there is an urgent call from opposition parties for new elections to minimize uncertainty. The timing is particularly critical as Germany is Europe’s largest economy, and instability here can ripple across the continent, affecting trade, investment, and collective European responses to global challenges.
**Interviewer:** Opposition leader Friedrich Merz has already called for a quick confidence vote. What are the implications if Scholz loses that vote?
**Dr. Weiss:** Should Scholz lose the confidence vote, we would likely see a snap election, potentially as early as late January. This scenario could lead to a fragmented parliament and longer coalition negotiations, which would further delay decisive economic action. The lack of a stable government in the interim could hinder Germany’s ability to recover from economic contraction, especially since many industries are already struggling with high costs and international competition.
**Interviewer:** It seems the economic condition is quite dire. How might this political instability affect Germany’s economy in the near future?
**Dr. Weiss:** The uncertainty surrounding the government has already impacted market confidence, as indicated by rising borrowing costs. Without a functioning majority, the interim government will struggle to implement effective economic policies. This uncertainty could diminish consumer and investor confidence, hampering consumption and investment—the key drivers of recovery in any economy. So, the outcome of this political upheaval will be crucial for Germany’s future economic trajectory.
**Interviewer:** Thank you, Dr. Weiss, for your insights. It seems like Germany is at a pivotal moment, and the decisions made in the coming weeks will have lasting implications.
**Dr. Weiss:** Thank you for having me. It is indeed a critical juncture, and the coming months will be telling for both Germany and the broader European landscape.
