Explainer: the story behind Germany's government collapse

After three tumultuous years marked by conflict in Ukraine, inflation, and economic recession, Germany's first so-called 'traffic light' coalition - comprising the Social Democratic Party (SPD), Free Democratic Party (FDP) and Greens - has collapsed. 

On Wednesday (November 6), Chancellor Olaf Scholz announced the dismissal of Finance Minister Christian Lindner, signaling an end to the coalition a few days shy of its three-year anniversary. 

It was an alliance that many hoped would inject fresh momentum into German politics after Angela Merkel's long tenure but has been troubled almost since its inception.

Scholz has proposed new elections by March 2025, with a minority government of SPD and Greens expected to govern until then. The decision comes as Germany faces both domestic economic struggles and heightened international pressures.

Why did the traffic light coalition collapse?

Named after the colors of its constituent parties - red (SPD), yellow (FDP) and green (Greens) - the coalition was initially seen as a new chapter in German politics, moving away from the Christian Democratic Union's (CDU) 16-year rule under Merkel. 

Emerging from the 2021 elections, in which the SPD achieved a 5 percent vote increase, the coalition represented a younger, more dynamic vision for German politics. However, economic and ideological tensions between the SPD, FDP, and Greens quickly eroded initial optimism.

Key conflicts centered on fiscal policy, where the FDP's Lindner opposed Scholz's push to suspend Germany's debt ceiling - a constitutionally anchored restriction on the amount the government can borrow, capped at 0.35 percent of GDP - to fund Ukraine aid and domestic programs. 

Scholz criticized Lindner for blocking compromises and prioritizing the FDP's base over national interests. In turn, Lindner accused Scholz of purposefully engineering the coalition's breakdown by demanding policies he could not support.

The ensuing conflicts led to high-profile dismissals as FDP ministers vacated their posts in Justice, Education, and Transport, marking the official end of the coalition - although transport minister Volker Wissing surprisingly retracted his resignation, choosing instead to leave the FDP while continuing in his post.

Political fallout and public response

The coalition's collapse has seen political and economic leaders pressing for immediate elections. CDU parliamentary leader Friedrich Merz and others have called for Scholz to initiate a confidence vote as early as next week. 

Sahra Wagenknecht, leader of the Sahra Wagenknecht Alliance, denounced the collapse as a "political bankruptcy," criticizing Scholz's prioritization of military spending over domestic investment.

"Suspending the debt ceiling to fund weapons shipments to Ukraine, while Germany's bridges and railways are crumbling and millions of pensioners live in poverty, shows why this government has rightly failed," Wagenknecht told the media. 

Why now?

The SPD has seen its popularity plummet, especially after two significant defeats in its former strongholds in East German state elections this autumn. Polls show the SPD's support hovering around 15 percent, a steep drop from the 25.7 percent it garnered in the 2021 election. 

If repeated at the next election it would mark the lowest level of support in the party's history. The coalition's poor handling of inflation, energy costs and economic policy further eroded public confidence, making new elections seem inevitable.

What's next for Germany?

The Greens have pledged to support a minority government with the SPD until elections are held. To stabilize the interim administration, Scholz appointed Jörg Kukies, a former Goldman Sachs banker and close ally, to succeed Lindner as Finance Minister. 

Kukies' experience is expected to bring continuity to economic policy in the short term.

The opposition continues to demand immediate clarity, and CDU leader Merz has called for Scholz to call a confidence vote no later than next week.

"The traffic light coalition has failed," declared Merz, reflecting the urgency many feel as Germany navigates an economic crisis and shifting international dynamics.