Germany’s governing “traffic light” coalition of the Social Democrats (SPD), Greens, and Free Democratic Party (FDP) has officially collapsed after nearly three years in office. On the 6^th of November, just one day after the US-elections of Donald Trump, Chancellor Olaf Scholz (SPD) announced the dismissal of Finance Minister Christian Lindner (FDP). The reasons he named were a loss of trust and irreconcilable differences within the coalition. The Greens have expressed their willingness to remain in government, while FDP ministers are withdrawing. The breakdown of this alliance stems largely from disputes over government spending, especially in the context of challenges like the war in Ukraine and Germany’s economic stagnation.

Heightened Economic Disagreements

The collapse of the coalition sheds a light on the deep divisions over fiscal policy between the governing parties. At a press conference, Scholz stated his decision was necessary to “prevent harm to the country.” Scholz criticised Lindner for prioritising party politics over national interests, saying, “too often, Minister Lindner has broken my trust. There is no basis for cooperation.” In response, Lindner described the coalition’s collapse as a “calculated breach” orchestrated by Scholz. He revealed that the Chancellor had demanded the FDP’s agreement to suspend the debt brake, a move Lindner could not support without disregarding the constitution. “Scholz has shown he lacks the strength to steer Germany toward a fresh start,” Lindner remarked, accusing the SPD and Greens of preventing FDP proposals for economic reform.

Germany’s economy, the largest in Europe, has faced significant challenges in recent years. It contracted last year for the first time since the onset of the COVID-19 pandemic, and its growth over the past five years has stagnated at just 0.2%. By comparison, the eurozone has seen growth of 4.6% in the same period, with France and Italy achieving 4.1% and 5.5% growth respectively. Structural issues such as high labour costs, an aging population, excessive bureaucracy, and outdated infrastructure have worsened the effects of the energy crisis spurred by the Russian invasion of Ukraine. These economic pressures fuelled debates within the coalition, with the SPD and Greens advocating for suspending the debt break to address immediate challenges, while the FDP opposed additional debt.

The Controversial Fracturing of the Alliance

The coalition’s collapse was not entirely spontaneous. According to the Zeit article “Liberal Playbook for Toppling the Government” that appeared on the 15^th of November, an investigation revealed that the breakdown of the coalition was a carefully orchestrated strategy by the FDP leadership. Their reporters discovered that behind closed doors, FDP leaders discussed the party’s future and its relationship with the coalition.

Internal discussions that were held over several weeks resulted in what insiders referred to as “Project D-Day”; a plan to bring down the government and leave in order to gain popularity with voters. The alliance’s foundation had always been precarious, bringing together the fiscally conservative FDP with the SPD and Greens, both of which favour increased government spending on social and environmental policies. As expected, the ideological gulf between these parties finally turned out to be too wide to overcome.

Challenges of The Russia-Ukraine War

One of the main issues of contention between the parties is the Russian-Ukrainian war. Although the numbers are somewhat contested, according to the government, Germany has provided about €30 billion in military aid to Ukraine so far. Additionally, the annual cost of accommodating Ukrainian refugees amounts to €12 billion. The SPD and Greens repeatedly called for suspending the so-called debt brake and taking on new loans to address these financial challenges.

Chancellor Scholz supports this approach, stating, “If one comes to the conclusion that we can simply sweat this out on the side (= only using regular household financing), then you’re setting the country on fire—let me make that very clear.” He emphasised that the current budget has already been stretched to its limits, with “everything that could be found in the corners of our budget scraped together” to fund these efforts. The FDP however is opposing the plan of taking on additional debt and used this situation to drive a wedge between the coalition.

The war has also placed Germany under significant international pressure. As Europe’s largest economy, Germany is expected to lead in addressing key challenges such as energy security, reconstruction efforts in Ukraine, and the EU’s broader geopolitical strategy. The coalition’s collapse comes at a critical time and has the potential to exacerbate an already weakened ability to influence EU policy and respond to global crises. Signs of this have already become clear at events like the Nordic-Baltic summit in November. Despite Germany being the biggest EU-country bordering the Baltic Sea, chancellor Olaf Scholz wasn’t present at the meeting where topics like security and transatlantic relations were discussed. Analysts warn that prolonged political instability could further erode Germany’s standing as a reliable partner on the world stage.

European and Global Implications

With the completion of nuclear phase out in 2023, Germany’s dependence on Russian energy before the war left it vulnerable to supply disruptions, forcing the government to seek alternative sources and accelerate the transition to renewable energy. These efforts have added to the financial strain on businesses and households. Energy-intensive industries, such as chemicals and manufacturing, have been particularly hard-hit, further worsening Germany’s economic slowdown. The FDP’s reluctance to increase borrowing reflects concerns about long-term fiscal sustainability. Critics also argue that austerity measures risk hindering the investments needed for economic recovery and energy transition. On top of that, Germany will have to invest in security measures and its military, especially after the outcome of the US-elections. 

The collapse of the traffic light coalition worsens the political vacuum in Germany at a time when the EU requires decisive leadership. Germany’s internal turmoil could delay progress on critical issues such as joint European defence initiatives and economic integration. The uncertainty also coincides with broader geopolitical challenges, including the recent re-election of Donald Trump in the United States and the expected trade war.

The Road Ahead

As Germany moves toward potential snap elections, the political landscape is shifting. The center-right Christian Democratic Union (CDU) is expected to emerge as the leading party. Meanwhile, the controversial far-right Alternative for Germany (AfD) continues to gain traction with their divisive views on migration. The AfD’s growing popularity represents deeper societal divisions in Germany. Another smaller but increasing party that is reaching significance in the German political landscape is the Sahra Wagenknecht alliance (BSW). This party, led by former member of the Left party Sahra Wagenknecht, is known for combining conservative migration policy with a more left-wing approach to social issues. They also take a softer stance towards Russia and have advocated against sending weapons to Ukraine.

So far, Scholz has announced plans to face a vote of confidence in the Bundestag on December 16. If he loses, new elections are supposed to be held on the 23rd of February end of March 2025 – seven months earlier than the regular elections which were planned for September 2025. Until then, his social democrats will maintain a minority government with the Greens. Germany’s last snap election occurred in 2005, following the collapse of Chancellor Gerhard Schröder’s government. As the country prepares for potential elections, the stakes are high not only for Germany but also for Europe as a whole. The outcome will shape the direction of Germany’s domestic and foreign policy at a time of unprecedented challenges on both fronts.