Germany’s coalition government could collapse

A government hangs in the balance this week — but it’s not necessarily the one in America. Germany’s stagnating economy has pushed its coalition government to the brink of failure.

The coalition that leads Germany is in “crisis mode,” said Deutsche Welle. Chancellor Olaf Scholz is attempting to “hold his coalition government together,” but the three parties in his partnership — the Social Democratic Party, the Greens and the Free Democratic Party — “seem unable to stop fighting.” That has long been the case, but the newest crisis comes because “Germany’s economy is stagnant and tax revenues have fallen,” said DW. Now the coalition partners must “clarify what they can still agree on,” or split up.

The latest source of disagreement: Christian Lindner, leader of the FDP, released an 18-page paper calling for a “fundamental economic overhaul” to jumpstart a slowing economy and close the government’s €2.4 billion budget gap, reforms that would cut social service programs and pull back from Germany’s climate goals, said The New York Times. Those are demands “his coalition partners are highly unlikely to accept.” Without such changes, Lindner said, his party might leave the coalition — triggering a snap parliamentary election. “The situation as it is now cannot continue,” Lindner said.

Europe’s largest economy “has slowly but steadily sunk into crisis,” said The Financial Times. Three big drivers of the economy — the automotive, chemical and engineering sectors — “are all in a slump at the same time,” making it likely that the annual gross domestic product will shrink for the second year in a row. That’s the “most pronounced downturn” in Germany’s postwar history, said Robin Winkler, Deutsche Bank’s Germany chief economist. This has left Scholz’s coalition “ever more paralyzed” about how to proceed, said the Times: “Light on the horizon is hard to detect.”

“Volkswagen’s woes mirror Germany’s,” Hanna Ziady said at CNN. The company recently said it could close factories and cut thousands of jobs. “Things cannot continue as they are now,” chief financial officer Arno Antlitz said to reporters. Both Volkswagen and its home country are challenged by “high labor costs, weak productivity and competition from China,” Ziady said. Those factors, alongside high taxes and an aging population, will require dramatic action. But arguments among the “fractious” three-way coalition has “left the government lacking a clear vision for the country.”

What next?

A snap election could be “disastrous for all three coalition parties,” said Reuters. SDP and the Greens have lost support since the 2021 election, and the FDP “could be ejected from parliament altogether.” But the dispute involves fundamental differences: FDP wants budget cuts, while the other two parties “agree that targeted government spending is needed to stimulate the economy,” Reuters said. Can the feuding partners stick together? “We don’t want to break the coalition,” said Greens co-leader Omid Nouripour.

That is a “make-or-break” moment for Germany, said Politico. The partners must agree on a plan for the budget, or risk failure. “If the budget fails,” said Economy Minister Robert Habeck, “we in Germany will enter a long period of uncertainty.”