A few hours after the meeting of the coalition committee (composed of the Social Democratic Party, the Greens, and the Free Democratic Party), the German Chancellor announced the dismissal of the Minister of Finance, in another step towards the clear collapse of the coalition, and after the Minister proposed holding early elections in order to resolve the dispute over the budget, which is The proposal was rejected by the German Chancellor.
Instead, Solčić (who said that his finance minister had repeatedly betrayed his trust, and that government action had become impossible under those circumstances) announced a call for a vote of confidence in the middle of next January, which could lead to early elections, while the government called for a vote of confidence to be held in mid-January. The opposition should not wait until the vote of confidence.
split
Head of the Economic and Diplomatic Affairs Department at the European Policy Organization, Nasser Zuhair, tells the “Eqtisad Sky News Arabia” website:
- This division in Germany is due to major differences between the parties of the German coalition. For the first time, Germany witnessed an alliance between three parties to form a government, namely the Socialist Party, the Liberal Party, and…Green Party.
- The differences between the Minister of Finance and German Chancellor Schulz focus on the constitutionality of the budget, as the Constitutional Court ruled that it is not permissible to use loans or reallocate loans remaining from the Corona pandemic.
- A loan package was allocated in Germany to confront the pandemic amounting to 60 billion euros, part of which remains. The government proposed using these funds for climate and energy programs, but the Constitutional Court rejected this proposal.
- This dispute led to tension between the Minister of Finance and the German Chancellor, as the Minister of Finance suggested to the Chancellor that early elections be held to resolve differences over the budget, but the Chancellor rejected this proposal.
- Accordingly, early elections are expected to be held at the beginning of next year, which will likely lead to the Socialists losing in light of their poor results in the local elections.
- The CDU is expected to return to power in a new coalition, making the continuation of the Socialists’ government or Schulz’s survival unlikely, unless these differences are resolved at the last minute.
As the differences worsened, the Free Democratic Party announced that it would withdraw all of its ministers from the government, amid criticism from its partners in the government coalition.
German opposition leader Friedrich Merz called for early elections in January following the collapse of Olaf Scholz’s government, warning that the country could not risk a long period of political uncertainty.
The head of the conservative Christian Democratic Union (CDU) party on Thursday rejected the timetable set by the German chancellor after he broke up the ruling coalition – a move that represented the culmination of a long-running row over economic policy and plunged Europe’s largest economy into political turmoil.
Merz pressed Schulz, saying there was “no reason” to wait until January 15 to table a vote of confidence in the Bundestag – meaning the earliest an early vote could be held is March. Business leaders echoed his call and warned of the need for urgent action to revive the German economy.
The opposition leader said that his parliamentary group unanimously agreed to demand that Schulz hold a vote of confidence “immediately, at the beginning of next week at the latest.” This would allow elections to be held in the second half of January.
Schulz said he wants to work with the CDU in the coming months to push forward measures to support businesses and stimulate the economy.
But Merz said: “We simply cannot afford a government without a majority.” Germany “For several months,” followed by an election campaign lasting months and weeks of coalition building. “Things have to happen quickly,” he added.
‘Controversial’ timing
From Berlin, Abdul Rahman Ammar, a writer specializing in European affairs, says in exclusive statements to the “Eqtisad Sky News Arabia” website:
- The disagreements between the German Finance Minister and the Chancellor are not new, but the fact that things reached the chancellor’s dismissal of his finance minister surprised the Germans. The timing of this step also surprised them, especially since it came shortly after Trump’s victory in the US elections.
- German and European fears about Trump’s return to power are known, as the Europeans fear that this will lead to them abandoning their security support and also affecting economic cooperation. So, Germany needed a strong government at this particular time, to support Ukraine as well.
- The Finance Minister’s justification for his position is that the budget presented by the Socialists and Greens does not take into account Germany’s critical situation.
- The Finance Minister refuses to abandon the debt ceiling, which means Germany will not be allowed to take on new debt to finance various projects, including support for Ukraine and increasing social aid.
- The Chancellor and his ally, the Green Party, believe that this trend is currently necessary due to inflation and economic problems. But many analysts agree that the Finance Minister’s move is also aimed at saving his party, which may face difficulty entering Parliament in the upcoming elections next year.
While regarding the current scenarios, Ammar says: The German government continues its work without the Liberal Party. The Chancellor has stated that he will put forward a vote of confidence in the government next January, in preparation for the possibility of holding early elections in March. On the other hand, the opposition is demanding an acceleration in holding the elections, considering that Trump’s return to the White House requires no delay in making appropriate decisions.
Uncertainty…and economists’ fears
In this context, senior businessmen in the largest European economy warned of the risks of increasing uncertainty at a critical time for the economy.
“In light of the global political situation and negative developments in the German economy, we need an effective new government with its own parliamentary majority as soon as possible,” said Siegfried Russwurm, head of Germany’s main business association, according to what was reported by the British Financial Times.
Deutsche Bank CEO Christian Sewing also warned that every month of inaction threatens to result in “a year of lost growth.”
“Germany faces major economic challenges, which is why we can no longer afford to remain passive,” he wrote on LinkedIn.
Germany’s long-term borrowing costs rose to their highest levels since July in the wake of the coalition’s collapse, as investors factored in the prospect of increased German borrowing after Schulz fired his hawkish finance minister, Christian Lindner. The yield on ten-year government bonds rose by 0.1 percentage point to 2.49%.
German President Frank-Walter Steinmeier said that many in the country are concerned about instability at home and in the world in the wake of the US elections and urged politicians to act responsibly. “This is not a moment of tactics and evasion, but rather a moment of rationality and responsibility,” Steinmeier said“.
German output is expected to contract for the second year in a row in 2024 amid deep problems in the automobile industry and the chemical and engineering sectors. Germany faces the risk of being exacerbated by the re-election of Donald Trump, who has pledged to continue protectionist policies that would deal a strong blow to European exports.
Major mitotic axes
Also from Berlin, journalist Mohammed Al-Khafaji points out, in special statements to the “Eqtisad Sky News Arabia” website:
The division within the German government is due to differences between the ruling coalition parties (the Social Democratic Party, the Green Party and the Free Democratic Party) on major issues:
- Economic policies: The Free Democratic Party supports a policy of austerity and cuts in government spending, while the Social Democratic Party (Party of Chancellor Schulz) and the Green Party seek to increase spending on social welfare and infrastructure. For example, the dispute over financing energy support plans for families and companies to confront rising costs, which has been implemented several times since the beginning of the Russian-Ukrainian war
- Environmental policies: The Green Party is pushing to achieve strict environmental goals to reduce emissions and shift the economy to renewable energy, but the Free Democratic Party fears the impact on industries and rising costs. An example of this is the controversy over reducing dependence on coal and stopping the production of conventional fuel cars by 2030, which companies also oppose. Cars produced in Germany.
- Immigration: The Social Democratic Party and the Green Party support more open immigration policies while the Free Democratic Party calls for greater regulation of immigration and asylum policies. An example of this is a dispute over the reception of refugees from conflict areas such as Syria and Ukraine.
- Foreign Policy and Defense: Differences in levels of support for Ukraine as the Social Democratic Party takes a more cautious stance on military funding, while the Greens push for more support.
As for the potential repercussions that affect the cohesion of the government coalition, in Khafaji’s estimation, they are represented in the disruption of important decisions and a delay in implementing energy transition programs or social support, and this may lead to the collapse of the coalition. Continuing tensions may push one of the parties to withdraw, which could lead to early elections.
This disagreement could lead to a decline in voter confidence, as voters may lose their confidence, which may lead to a strengthening of the opposition, especially the right-wing parties, whose progress in opinion polls indicates in the recent period, according to Khafaji.
In addition, at the European level, “this dispute contributes to the weakness of the German role in Europe, as the government’s instability may affect Germany’s ability to lead European policies, especially with regard to energy and defense policy, in which Germany has become an important focus.”
European reactions
NATO Secretary General Mark Rutte expressed his confidence that Berlin “will fulfill its obligations” in the field of defense and foreign policy.
Germany is the second largest provider of military aid to Ukraine after the United States. “I’m not worried about that,” Rutte said upon his arrival at the European leaders’ meeting in Budapest.
In turn, European Commission President Ursula von der Leyen, former German Defense Minister, said that the government crisis “is for Germany to discuss,” adding that it is important for EU members to “stay on the right track.”
The effect of Trump’s return!
European affairs editor at the Financial Times, Ben Hall, in an article on Thursday, linked Trump’s victory to what is happening in Germany, saying: Only twelve hours after Donald Trump won the US presidential elections, his “America First” policy claimed its first victims. Europeans with the collapse of the coalition government in Germany. The three ruling coalition partners – Olaf Scholz’s Social Democrats, Economy Minister Robert Habeck’s Greens, and Finance Minister Christian Lindner’s liberal Free Democrats – have been at loggerheads over policy to the point of paralysis for months.
On Wednesday, they met to try to resolve their differences over a €9 billion gap in the 2025 budget. The disagreement over the fiscal deficit – a tiny amount compared to planned spending of more than €2 trillion – was actually a proxy for a much broader ideological divide.