Germany’s government puts itself out of its misery

By Katja Hoyer

Germany’s ruling coalition collapsed on Wednesday, the same day Donald Trump was reelected in the US.

The upheaval in Berlin couldn’t have come at a more tumultuous time, but this shock to the system is exactly what Germany needs to shake out of its malaise.

German Chancellor Olaf Scholz sacked his Finance Minister Christian Lindner over deep rifts within the government on how to revive Germany’s ailing economy.

Scholz, normally understated in his communication style, told the press on Wednesday that Lindner “has broken my trust too many times.” In a scathing attack, he described the behavior of his former minister as “petty” and “selfish.”

Lindner accused Scholz of not “having the strength” to give the country the “fresh start” it needs. He argued the chancellor’s ideas were “flat, unambitious and contribute nothing to overcoming the fundamental lack of growth in our country.”

Those stark words mark the final showdown of months of deteriorating relations in Scholz’s coalition. Yet, it had started in good faith when Scholz took office in December 2021, allying with his own Social Democrats (SPD), the Green Party and Lindner’s Free Liberals (FDP).

A three-way coalition had never been tried before at the national level, but the parties had one common goal: to “Dare More Progress,” as their coalition treaty put it.

After 16 years under Angela Merkel, their program promised digitization, investment and more principled foreign policy. These were things all three parties could get behind and so could much of the country. When Scholz took office, a survey indicated that three-quarters of Germans believed he would do a good job as chancellor.

But the modernization package was soon bogged down by ideological differences. Lindner’s pro-business party envisioned a lean state. The Greens wanted heavy subsidies to get to net zero, and the SPD struggled with internal party rifts over how left-wing it should be.

Add immigration, the war in Ukraine and other challenges to the mix, and the modernization platform becomes too small to cover fundamental differences.

The result was constant infighting and stagnation. Now, only 14% of people are happy with Scholz’s government, according to a recent survey. Polling indicates that the three governing parties would get less than a third of the vote combined.

Germans are fed up with a coalition unable to make decisions as gloomy economic news is a near-daily occurrence. The German car giant Volkswagen AG is set to close factories in its home country for the first time in its history, and BMW AG just announced that its profit margin fell to the lowest in more than four years.

But it’s not just Germany’s all-important car industry that’s in trouble. The country is in recession with “no clear catalyst for a turnaround,” according to an analyst at Rabobank Group.

Germany’s entire economic model is “stuck in crisis” as the IFO Institute’s gloomy autumn forecast put it. Germans rightly worry about the economy. A recent study showed that the cost of living is their top concern. Yet the coalition can’t agree on what to do about this.

Lindner prefers a pro-market approach. Last week, a paper was leaked in which he argued for tax cuts, reduced welfare and lower environmental standards. The Green Economy Minister Robert Habeck attacked Lindner for “undermining climate protection and social justice.“

Chancellor Scholz held his own economic summit last week inviting neither his Finance nor his Economics Minister, and planning to host the next one on Nov. 15 without them, too. The three men had abandoned attempts to hide the rifts between them long before Lindner’s sacking this week.

Nonetheless, the rapid escalation on Wednesday shocked many. With the Liberals out, the SPD and the Greens plan to continue as a minority government until Scholz calls a confidence vote on Jan. 15. If he loses this, elections will take place in March rather than September as scheduled.

Drastic political change is on the cards. According to the polls, new elections might kick Lindner’s FDP out of parliament altogether. The Greens might end up in opposition with just 10 per cent of the vote.

Scholz himself would have little time to turn the tide on the prospect of being Germany’s first one-term chancellor since the 1960s. The conservative Union is likely to win but will need at least one coalition partner.

The German government falling apart in a time of great change in America will frighten many, not least because Trump’s return to the White House poses big questions for European security and the war in Ukraine.

The rising power of Germany’s anti-establishment parties is also no longer a theoretical threat. In September, the far-right Alternative für Deutschland (AfD) gained nearly a third of the vote in elections in three eastern German states, causing paralysis in coalition building in at least two of them.

The left-wing, conservative and pro-Russia Bündnis Sahra Wagenknecht (BSW) gained enough votes to be indispensable as a coalition partner in 3 of Germany’s 16 states so far.

Both parties are set to make gains at the next election, with the AfD currently polling ahead of all three governing parties in second place. Nearly half of the population is afraid of political extremism, according to one study.

On the other hand, not many voters trust the mainstream parties will bring change. Fewer than a quarter of respondents said in a survey last week that they think a government led by the conservatives would do a better job.

Yet, nobody should be fearful of a snap election in Germany. The status quo was neither stable nor sustainable. Huge issues need fixing, like the sluggish economy, conflicts arising from mass immigration, war in Europe and chronic underinvestment. On none of these issues did Germany’s coalition share a common vision.

It’s good that Berlin has finally ripped off the band-aid. Political parties now have an opportunity to reset and make the electorate a new offer. Germany needs fresh ideas — and fast if it’s to lead itself and Europe into a better future.