The collapse of the traffic light coalition reflects deep divisions within German politics, particularly over economic policies and budgetary discipline.
Chancellor Scholz's attempts to maintain government functionality despite being in a minority position may face significant hurdles, especially given the urgency expressed by opposition leaders for early elections.
If early elections are held, the conservative CDU is likely to gain a significant portion of the vote, potentially leading to Friedrich Merz becoming Chancellor, though he may also struggle to form a stable majority.
The political instability in Germany may lead to increased uncertainty in European markets, particularly in light of the economic challenges posed by external factors such as the recent U.S. elections.
German Chancellor Olaf Scholz faces mounting pressure from conservative rivals following the collapse of his coalition government, known as the traffic light coalition, which included the Social Democrats (SPD), the Greens, and the Free Democrats (FDP). Friedrich Merz, leader of the Christian Democratic Union (CDU), has called for a confidence vote in parliament as early as next week, arguing that the country cannot afford a government without a majority for several months. Scholz's government is now a minority, and he plans to push through key legislation before a potential vote of confidence in January.
The coalition's collapse was precipitated by the dismissal of Finance Minister Christian Lindner, which has led to a significant reshuffling within the government. Despite this upheaval, Chancellor Scholz is determined to implement critical projects, such as tax relief measures to counteract 'cold progression' and stabilize pensions amidst an economic downturn. However, the lack of a majority complicates his ability to pass these initiatives, as he will need the support of the opposition.
Scholz's plans also include reforms to the EU asylum system and a 'pact for industry' aimed at revitalizing Germany's struggling economy. He has expressed a need for cooperation with Merz to address pressing economic and defense issues, but the CDU leader has insisted on an expedited vote of confidence, highlighting the urgency of the political situation in Germany.
