German coalition collapses, Scholz embarks on risky election gambit

Berlin: German Chancellor Olaf Scholz has called for a snap election after his fractious, three-way coalition finally collapsed over how to revive the lacklustre economy.

The political crisis came to a head after Scholz dismissed his finance minister, Christian Lindner, saying the chairman of the pro-business FDP party had refused a proposal to suspend rules limiting new borrowing to help plug a shortfall in next year’s budget. Scholz called for a confidence vote in his government to take place in January, with a goal of pulling forward next year’s federal election to March.

Scholz’s gambit is highly unusual in German politics since World War II. The national election was brought forward only twice in West Germany, in 1972 and 1983, and only once since reunification in 1990. Former chancellor Gerhard Schroeder, also a Social Democrat, triggered an early election in 2005 before losing to Angela Merkel, who went on to run the country for 16 years until Scholz took over.

German Chancellor Olaf ScholzCredit: AP

Scholz and his ministers have presented a dysfunctional image in recent weeks, holding rival meetings with industry groups and labour officials and publishing conflicting policy papers resembling campaign manifestos.

The government turmoil comes on the heels of the re-election of Donald Trump in the US, which has raised the prospect of a new transatlantic trade war and has forced a reassessment of Europe’s defence relationship with Washington. Germany is also struggling with a stagnating economy that has seen a lengthy retreat in its manufacturing sector.

“Too often, the necessary compromises were drowned out by publicly staged disputes and loud ideological demands,” Scholz said in unusually pointed remarks, adding that Lindner was focused on the short-term survival of his own party. “Such egotism is completely incomprehensible.”

German Finance Minister Christian Lindner, right, gets into his limousine in front of the Reichstag building after his dismissal by Chancellor Olaf Scholz.Credit: AP

The euro declined slightly after the announcement, but the move pales in comparison to earlier losses on the back of Trump’s victory.

The conservative CDU/CSU alliance under Friedrich Merz is currently leading in opinion polls with more than 30 per cent of the vote and would be in prime position to win an early ballot, restoring it to power after it lost to Scholz’s SPD three years ago.

Scholz argued that Germany needs “more financial wiggle room” to deal with the difficulties it confronts.

“The situation is serious. There’s a war in Europe, increasing tensions in the Middle East, the economy is stagnating,” Scholz said. “Companies need support now.”

The German economy has failed to mount a sustained rebound from the pandemic and war in Ukraine, with some economists predicting 2024 output to shrink for a second year in a row. The main weakness is its important manufacturing sector, which is weighed down by soft foreign demand, high borrowing costs and a host of structural issues at home.

“Olaf Scholz has long since ceased to be interested in an agreement that is acceptable to all, but rather in a calculated break-up of this coalition,” Lindner said in a statement. “In doing so, he is leading Germany into a phase of uncertainty.”

German chancellors don’t have the power to call an early election, which lies with the federal president, but they can try to trigger one by deliberately losing a confidence vote in the lower house of parliament.

Once Scholz fails to garner a majority in the January 15 ballot, he can ask President Frank-Walter Steinmeier, a former Social Democrat vice chancellor, to step in and dissolve parliament. The election would then have to be held within 60 days.

Meanwhile, his cabinet has approved a draft law that would allow the army to gauge the readiness of the country’s 18-year-olds to serve in the Bundeswehr (Armed Forces) as it looks to boost troop numbers for NATO obligations without resorting to conscription.

The war in Ukraine prompted a debate in Germany over whether to reintroduce conscription, which was ended in 2011, to boost shrinking troop numbers in response to a more aggressive Russia.

It currently has 180,000 soldiers, which it wants to increase to 203,000 by 2031, as well as 60,000 reservists.

The aim is to eventually reach 200,000 more reservists, which would enable the country to swiftly expand its troops to around 460,000 in the event of war.

With the end of conscription, Germany stopped the registration of 18-year-olds for military service, leaving the country without a reliable database on whom it could call up.

The aim of the new law is to once again have an overview of those figures: Under the model proposed, all men turning 18 – about roughly 300,000 next year – will have to fill out a digital survey on their interest in joining the army.

Young women will also be sent the survey but are not obliged to respond.

Bloomberg, AP