Germany's government coalition has disintegrated, primarily due to disagreements over economic policies and budget investments. The ruling coalition, known as the 'traffic light coalition', officially ended on November 6, 2024, following a series of escalating tensions regarding economic strategy.
Chancellor Olaf Scholz has called for the dismissal of Finance Minister Christian Lindner, whose proposals for a regulatory moratorium and tax cuts were met with strong opposition from the Social Democrats and the Greens. Lindner's plans included abolishing the solidarity contribution and delaying climate goals, which were deemed unacceptable by his coalition partners.
Economic leaders have expressed deep concern over the political instability. Bosch, a major automotive parts manufacturer, has adjusted its forecasts for 2024 and is contemplating further job cuts beyond the already announced 7,000. Stefan Hartung, CEO of Bosch, urged the federal government to resolve coalition disputes and implement concrete measures to stabilize the economy.
In the context of heightened global political tensions, Economy Minister Robert Habeck warned that the timing of the coalition's collapse is particularly detrimental as Germany faces challenges in demonstrating unity and capability within Europe.
Analysts have pointed out that Germany's economic vulnerabilities have worsened since Donald Trump's initial election in 2016, with the country now being more susceptible to external pressures. Hening Fepel, an economist, emphasized that Germany's structural weaknesses are a significant factor in its economic stagnation.
To address the economic crisis, experts have outlined four urgent tasks: stabilizing the energy transition, reducing bureaucracy, advancing digitalization, and implementing tax incentives for investment. There is a consensus that a calm and measured approach is necessary to reassure businesses and consumers about future economic conditions.