Germany heads for February snap election

Berlin — Germany is set to hold snap elections on February 23 after the collapse of Chancellor Olaf Scholz’s governing coalition, but officials warned on Tuesday it would leave the 2025 budget and several other policy initiatives in limbo.

The election date is a compromise between the conservative opposition, who wanted a vote in January for fear of leaving Germany rudderless, and Scholz, who wanted a mid-March election to give authorities and parties more time to prepare.

Inflation, Russia’s invasion of Ukraine, intensifying competition from China and US President-elect Donald Trump’s return have combined to confront Germany whose economy, Europe’s biggest, prospered from abundant energy, and a benign, pro-trade international political environment.

Reflecting that, the ZEW institute’s investor morale index tumbled to 7.4 points on Tuesday from 13.1 points in October, a much sharper drop than analysts had expected.

A government with a clear majority would be better able to broach topics such as the country’s debt brake, blamed by many economists for the low investment rate, or to make money available for important industries.

The February 23 date is predicated on Scholz holding a confidence vote on December 16 that he would be expected to lose.

A leader in Scholz’s Social Democrats said the party stood by the chancellor and brushed away suggestions that Scholz should step side for another candidate, such as the more popular defence minister Boris Pistorius.

“Now it’s about experience and competence and I am sure that Olaf Scholz is the right candidate,” SPD parliamentary group leader Rolf Muetzenich said.

Scholz conveys “trust, competence, experience, but at the same time also the necessary emotions”, he said.

Closing window

Scholz, who now runs a minority government with the backing of the Greens, hopes to secure enough opposition support to pass laws to protect the Constitutional Court from the far right and to boost funding for Ukraine before leaving office.

His government collapsed last week after months of wrangling between the two remaining parties and their erstwhile coalition partner, the neoliberal Free Democrats, who demanded spending cuts on a scale their left-wing partners were unwilling to countenance.

Friedrich Merz, leader of the opposition Christian Democrats and favourite in current polls to become chancellor, has so far ruled out scrapping the debt brake.

On Tuesday, he promised a major tax reform but was non-committal on helping the government pass all but the most pressing legislation between now and the election.

That means raising child benefits or tax thresholds to tackle fiscal drag might have to wait until a new government is in power.

Joerg Kukies, who was appointed finance minister after Scholz sacked his one-time coalition ally Christian Lindner over budget disputes, said passing a 2025 budget was not realistic.

“It’s not the end of the world,” he said.

He added that a strategy on power plants would have to wait but that the government would stick to plans to reprivatise energy company Uniper, which was rescued during the energy crisis after Russia’s invasion of Ukraine in 2022.

He also echoed the government’s criticism of Milan-headquartered Unicredit’s mooted takeover of German lender Commerzbank, saying the European banking system didn’t need such aggressive takeovers.

Reuters