German govt in crisis as Scholz's ruling coalition collapses: All you need to know

Germany plunged into political turmoil on Wednesday as Chancellor Olaf Scholz dismissed finance minister Christian Lindner, leading to the collapse of the ruling coalition. The breakdown of this three-party government is expected to result in early elections, potentially by March 2024, as Scholz seeks a new mandate amid deepening political divisions in Europe’s largest economy.

Announcing Lindner's dismissal, Scholz cited irreconcilable differences over fiscal policy and accused his former finance minister of prioritising "party interests over national stability." The decision follows months of tensions within the coalition, with the fiscally conservative Free Democrats (FDP), led by Lindner, resisting budget compromises proposed by Scholz’s Social Democrats (SPD) and the Greens.

In the face of an economic downturn and strained alliances in Europe, Scholz plans to seek a vote of confidence in January. “Germany needs a functioning government, one that can take decisive steps to strengthen our economy and security,” Scholz declared. With Donald Trump’s re-election in the US adding uncertainty to transatlantic relations, Scholz stressed the need for stability.

The chancellor also hinted at the possibility of working with opposition leader Friedrich Merz of the Christian Democratic Union (CDU) on crucial policies. Vice Chancellor Robert Habeck indicated that the Greens would remain in a caretaker role, expressing hope for continuity despite the crisis.

Here's all you need to know:

• Scholz dismissed Lindner following ongoing disputes over budget policies. The chancellor cited Lindner’s opposition to debt relaxation and climate investments as incompatible with his administration’s economic vision.
• Scholz announced he would pursue a vote of confidence on 15 January, which could trigger early elections in March, six months ahead of the scheduled date.
• Germany’s economy is expected to contract for the second consecutive year. Scholz’s coalition partners struggled to agree on fiscal strategies to revive growth, with Lindner’s FDP demanding tax cuts and deregulation against SPD and Green opposition.
• Scholz extended an offer to collaborate with CDU leader Friedrich Merz on issues of national importance, particularly on economic and security policies.
• The collapse of Germany’s government amid heightened global tensions, including Trump's re-election and conflicts in Ukraine and the Middle East, has sent ripples through Europe. Green party leaders called the timing of this crisis “disastrous for both Germany and Europe.”