Brussels – German Chancellor Olaf Scholz will have to don the shoes of the fireman, but also those of the bridge-builder, when, starting today (Nov. 4), he will meet with his quarrelsome government partners to try to settle the collapse of the tottering “semaphore coalition,” the unprecedented political coalition—made up of Social Democrats, ecologists and liberals—that has been governing in Berlin since the Merkel era ended. The bone of contention is a proposal to jumpstart the German economy, circulated by the finance minister, the liberal Christian Lindner, which goes in the opposite direction to the one put forward by the economy minister, the environmentalist Robert Habeck. If no agreement is reached, Germans could return to the polls as early as next spring.
A quarrelsome coalition
Chancellor Scholz’s week begins with a decidedly complex Monday. The Social Democratic leader will meet today the representatives of the two parties with which his SPD has shared executive power since 2021: the Greens (Bündnis 90/Die Grünen) and the liberals of the FDP (Freie Demokratische Partei). The goal is to prevent the coalition government from collapsing. The reason why this might happen is an informal document released last Friday (Nov. 1) by the Finance Ministry in which a rigorist plan to restore the German economy is proposed, in stark contrast to the plan advanced just a week earlier by the minister for the Economy, which was decidedly more generous in terms of public investment.
In the end, the redde rationem between the “hawks” of the FDP, to which Finance Minister Christian Lindner belongs, and the ecologists of Economy incumbent Robert Habeck (likely candidate for the chancellery in 2025) seems to have arrived. The former are notoriously strict on public finances, while the latter (along with Scholz’s SPD) favour a more central role for the state in the economy. Thus, less than a year before the next legislative elections, the political clash may have reached the point of no return.
Two alternative plans
Habeck’s proposal envisages the introduction of a multi-billion-euro fund (no precise figure is known) to stimulate investment and circumvent the tight budget constraints imposed by German laws. “The budget’s room for manoeuvre is too limited to allow for public and private investment on a significantly larger scale than at present,” reads the document prepared by the Economy Minister, who lashed out mainly at the “debt brake,” a constitutional provision that prevents the Berlin government from spending more than it recovers each year. The fund would be aimed primarily at businesses (from startups to SMEs to large corporations) and last five years.
In contrast, Lindner calls for a substantial tax cut and a stop to new green legislation, which would have proven harmful to businesses and the economy in general. The finance chief is calling for “an economic turnaround with a revision of fundamental parts of key policy decisions,” including, among other things, the immediate abolition of the so-called “solidarity surcharge” (a 5.5 per cent contribution introduced after reunification that companies in former West Germany have to pay extra on their taxes to “compensate” for the economic backwardness of regions in the former GDR). Other members of the FDP—the needle in the Bundestag for the survival of the majority—have reportedly closed the door to negotiations on the federal budget for 2025 (which would imply the opening of a government crisis) if Scholz’s “traffic light” executive does not change its approach on economic policy.
Avoiding the worst?
During a series of meetings with Lindner and Habeck that could go on throughout the week, the chancellor will now try to square the circle by holding together as many elements as possible of the two plans to recover Germany’s productive engine. The crisis in the Old Continent’s strongest economy has only drawn deeper and deeper furrows between those who should be allies but are in often irreconcilable positions, making litigations between government partners increasingly frequent and paralyzing.
For some observers, the crisis of the Scholz government would now be inevitable and could bring the German electorate to the polls several months ahead of the natural expiration of the legislature, that is, in March instead of September 2025. For that matter, Lindner himself had already considered the possibility of withdrawing from the coalition executive following the resounding defeats recorded by his party in the regional elections in Saxony, Thuringia, and Brandenburg in case the FDP’s demands on economic policy were not met.
Pushing for early elections, of course, is the CDU/CSU of Friedrich Merz, the main opposition party. According to the latest polls, the Christian Democrats have about 32 per cent of support. They would easily win back the chancellorship, ending the lacklustre Herr Scholz interlude and picking up where Frau Merkel left off.
English version by the Translation Service of Withub
