Germany finds itself at a crossroadswith a government in crisis and an increasingly worrying economic situation. This afternoon the chancellor Olaf Scholz will meet the president of the Christian Democratic Union (CDU), Friedrich Merzto discuss the next stages of the government crisis that has shaken the country in recent days. The situation is complex: Scholz has ruled out a vote of confidence in the Bundestag before January 15 and aims to hold an early general election by the end of March. Merzopposition leader, instead asked for a quicker decision, urging a vote of confidence “at the beginning of next week at the latest”, in order to be able to call elections in the second half of January.
The economic context accompanying the political crisis is equally disturbing. German industrial production took a hit in September, falling 2.5% from the previous month, much worse than analysts expected. The annual decline was even steeper, with a contraction of 4.6%. Difficulties in the automotive sector, which saw a decline of 7.8% in September after a rebound in August, and the energy crisis, which has slowed the recovery of energy-intensive industries, are among the main factors behind this debacle. Although Germany remains Europe’s largest economy, its industry appears to be in full recession, unable to recover from a crisis that has lasted for months.
To further complicate the situation, German exports fell by 0.7% compared to Augustwith China reducing its purchases from the country, marking a 3.7% decrease in German imports. In contrast, the United States continued to be a favorable destination for German products, with exports increasing by 4.8%. However, uncertainty about the future of international trade and the country’s internal difficulties pose a serious threat to the already fragile German economy.
Analysts, like Jens-Oliver Niklasch of LBBW, warn that Germany risks going off the rails, with a possible prolongation of the recession, if timely action is not taken. Plus, growing concern about the administration’s trade policy Trumpwhich has made customs barriers one of its main strong points, only increases the level of uncertainty for German companies.
The political picture became even more incandescent last night, with the definitive breakdown of the government coalitionwhich featured an alliance between the Social Democrats (SPD), the Greens and the Liberals (FDP), known as the “traffic light” coalition. The crisis exploded after the resignation of the Minister of Finance, Christian Lindnerleader of the Liberals, which marked the end of collaboration between the parties. Differences over economic policy and the budget have undermined the foundations of the government: while on the one hand the SPD is pushing for an increase in public spending to stimulate the economy, on the other the liberals are calling for cuts and greater rigor.
In a dramatic speech, Chancellor Olaf Scholz declared that there is no longer “sufficient trust” to continue cooperation between coalition parties, indicating that the situation can no longer be sustained. Despite that, Scholz he tried to maintain a pragmatic line, announcing the possibility of a minority government that could continue to govern at least for a few months, trying to obtain majorities from time to time to approve crucial laws.
The 2025 budget, at the center of the dispute that led to the breakdown, is now pending, and without an agreement, a scaled-down version of the plan could be adopted. Scholz he anticipated that, in the event of his probable defeat in the confidence vote in mid-January, early elections will be held, probably by the end of March.
The political crisis and economic instability affecting Germany not only have internal repercussions, but could also affect the future of the European Union. As the Foreign Minister underlined Annalena Baerbockthe breakup of the coalition represents “a bad day for Germany, but also for Europe”. In this context, Germany is preparing to participate in an informal summit in Budapest, with Ukraine and Turkey, while the internal crisis seems to compromise the country’s ability to face crucial challenges, both political and economic, in a time of uncertainty global.
The path to the future remains uncertain. Germany, historically considered the locomotive of the European economy, is now facing an unprecedented crisis that risks upending the entire political and economic system of the country. The challenge for Olaf Scholzand for Germany’s future, will be finding a way out of this instability that not only threatens its leadership, but also the unity and economic strength of Europe.
