On the day that the US elections provided a mandate for Donald Trump, there were ripples in Europe, raising anxiety about dealing with the US under Trump 2.0. If this was not shocking enough, the German ‘traffic light coalition’ government went on the blink.
After weeks of wrangling, Chancellor Olaf Scholz, fed up with internal coalition problems, sacked Finance Minister Christian Lindner, the leader of the Free Democratic Party (FDP) within his coalition. The FDP has been out of sync with demands for higher expenditure sought by Chancellor Scholz and his Social Democratic Party (SPD) and by the Greens. This led the FDP to break out of the coalition.
Among the issues for which higher allocations are required are greater support to Ukraine, rising expenditure on renewable energy – a pet project of the Greens – and to continue to maintain the social welfare measures that Germany is accustomed to rather than pare them down.
These expenditures would require an easing of German rules on budget deficits. This is what the FDP and the finance minister were reluctant to do, instead asking for more alternate measures to revive the economy. The German economy is not doing well, and its current growth rate is reduced by 0.2 per cent—Germany’s first two-year continuing recession this century. In 2023, GDP diminished by 0.3 per cent. The economy faces higher energy prices, lower overseas demand, and a loss of competitiveness in the automobile sector.
The SPD and the Greens believe that they could spend their way out of trouble, which the FDP resisted up to the breaking point. Over the last weeks, there was speculation that the FDP would quit the coalition, but Scholz has bitten the bullet on a critical day for Europe and Germany and actually sacked the finance minister, and expectedly, the FDP broke out of the coalition. With this, the FDP, which has 91 seats in the Bundestag and provided the ballast to the coalition, reduced the ruling coalition to a minority.
The FDP had four ministers; besides the finance minister, it also held the ministries of justice, digital and transport, education and research. The Greens hold five, including the Vice Chancellor and the Federal Minister for Economic Affairs and Climate Action, Robert Habeck, and Foreign Minister Annalena Baerbock, both of whom were in Scholz’s delegation, which visited India recently.
Some analysts believe that the FDP obduracy is less on policy and more on sustaining their political future. Besides performing poorly in recent elections in the East German states, in an October poll by public broadcaster ARD, the FDP obtained merely 4 per cent support. This is below the 5 per cent requirement for representation in the Bundestag. In 2021, it had leaped to 11.4 per cent from an earlier 10.7 per cent so this is serious for its identity. The FDP faces oblivion and wants to find some way of getting back into the limelight. It is not clear if cabinet obduracy on budget issues was the best way for this.
The coalition itself in the survey had fallen to a support rate of 14 per cent, reduced by 5 per cent over a month. As many as 85 per cent people in the survey were dissatisfied with the performance of the coalition government. Their major concerns were about economic and fiscal policies, and they appeared very dissatisfied at the continuing and frequent disagreements among the coalition partners and the inability of the SPD to manage them. Delays in decision-making also led to delays in policy implementation, which impacts people negatively.
In the same poll, the Chancellor’s Social Democratic Party maintained its 16 per cent support base, while the Greens fell to 11 per cent. These compare to 25.7 per cent and 14.7 per cent in the previous elections. All three partners together had only 31 per cent, whereas the Christian Democratic Union, now being revived under Friedrich Merz, is at 34 per cent support. The far-right Alternative for Democracy is 17 per cent making it the second largest party, even above the SPD.
The prospects of an election soon were not good for any of the partners of the coalition. If the election were held now, the Christian Democratic Union (CDU) could win, but since nobody would align with the Alternative for Germany (AfD), the CDU would probably need the SPD again for a grand coalition because the Greens and the FDP would probably not be in a position to provide enough ballast for a new coalition.
What is important is that in the poll, released on October 31, 54 per cent of the people were in favour of a quick election, and only 41 per cent were happy to let the current government continue till the scheduled election in September 2025.
So, what happens now?
Scholz has shown decisive action in turning out the finance minister.To which FDP reacted by leaving the coalition. Scholz intends calling a confidence vote in mid-January and has reached out to the CDU for issue-based support. The Greens will sit gingerly because early polls don’t sound good for them either.
It is unclear whether the CDU would offer issue-based support and drag the coalition till the scheduled election in September. This would be seen as a national decision because Germany needs stability and political clarity to deal with Trump 2.0 in the US.
If Scholz obtains CDU support and has a stable minority government by January 15, then they would be in a position to have a more coherent bipartisan approach to Trump, who will be sworn in on January 20. The month ahead, therefore, is critical for the German government and the German parties.
The author is a former ambassador to Germany, Indonesia, Ethiopia, ASEAN and the African Union. He tweets @AmbGurjitSingh. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.