In Germany, the three-party coalition known as the “traffic light coalition” has collapsed amid the country’s economic problems. The crisis within the ruling German elite reached its peak after Chancellor Olaf Scholz dismissed Finance Minister and leader of the Free Democratic Party (FDP), Christian Lindner.
Scholz accused Lindner of selfishness because the FDP refused to suspend the rules limiting new government borrowing, and they “showed no willingness to help Ukraine.” Scholz had long lost interest in a mutually acceptable agreement and was more focused on the coalition’s collapse. Along with Lindner, the German Transport, Justice, and Education Ministers also stepped down.
The collapse of the “traffic light coalition” was partly influenced by Donald Trump’s re-election as U.S. President, which increased the likelihood of a new transatlantic trade war and could force Europe to reconsider its relationship with Washington. Scholz announced that he would raise the issue of a confidence vote in his government in the Bundestag in early 2025. If, as expected, he loses the vote, it would pave the way for early elections, which could be held in March next year. “The situation is serious. There is war in Europe, tensions are rising in the Middle East, and the economy is stagnating,” noted the German leader.
However, Scholz’s unusual move in German politics carries significant risks, as the last time his Social Democratic Party opted for early elections in 2005, it led to Angela Merkel’s victory and her subsequent 16-year tenure. “The collapse of the German government coalition couldn’t have come at a worse time for Europe,” said Rajeev De Mello, investment director at Gama Asset Management. Meanwhile, the conservative CDU/CSU alliance led by Friedrich Merz is leading in the polls, securing over 30% of the vote, and is well-positioned to win the early elections and return to power.
Translated and edited by L. Earth
