Germany assesses risks of coalition break-up over budget row as U.S. vote looms large

Amid an ongoing row among coalition leaders over the 2025 budget and the path of the country’s industrial recovery that intensified in early November, Green Party economy minister Robert Habeck on Monday (4 November) warned that the government’s cohesion must not falter while the EU anxiously awaits the outcome of the U.S. elections on Tuesday (5 November). “The last couple of days have been bad for Germany and they did not help to strengthen trust in the government’s stability,” Habeck said in a report by public broadcaster ARD.

The government coalition of chancellor Olaf Scholz’s Social Democrats (SPD), the Green Party and the Free Democrats (FDP) must do everything to find compromises, as it has done through difficult times over the past few years, Habeck said. Scholz has scheduled a series of meetings with members of his cabinet over the past days as coalition representatives are expected to meet on Wednesday evening (6 November) in Berlin to agree on a budget draft, with a 14 November deadline. Habeck also addressed FDP finance minister Christian Lindner, who is preciding over a budget gap of more than ten billion euros out from a budget of about 480 billion euros, saying unused support funds from a frozen semiconductor factory project should be used to balance the books.

Parties weigh consequences of coalition collapse

Finance minister Lindner on Monday (4 November) said his positions laid out in a leaked paper at the end of last week, in which the pro-business FDP politician called for fundamental economic policy changes, are necessary to restore the country’s competitiveness and economic growth. For example, Germany's “unique path” in energy policy focused on renewable energy sources, as Lindner put it, needed doing away with. Another leading FDP government member, transport minister Volker Wissing, over the weekend had warned that the coalition should strive to find common ground to fulfill its responsibility. “Governing is not easy,” Wissing said in an article for the Frankfurter Allgemeine Zeitung. “We are responsible for making it work,” he argued.

Speaking for the SPD, co-leader Saskia Esken on Monday (4 November) said that chancellor Scholz’s party would be ready for any outcome from the budget talks, even a possible collapse of the coalition. “We of course have considered all scenarios,” Esken said in an article by news agency dpa published on news website n-tv. “We are well prepared,” Esken said with a view to leading a possible minority government, should the FDP leave the coalition. However, she added that the SPD would plan on leading the coalition government as it stands into the next scheduled election in autumn 2025.

Commentators split on proposals

Writing for public broadcaster ARD, Torben Ostermann in an op-ed said the government would risk a lot by gambling with a possible coalition collapse, which would likely paralyse most political progress in the country for months to come. “Is it really helping the economy if we now fully enter campaigning mode? Can Germany afford this?,” Osterman said. He added that “loud demands and long papers are no economic policy – merely the simulation of it.” All parties must stop seeking short-lived applause from their own base at this critical time, he argued. “This has to stop.”

In an opinion piece for tabloid Bild, Paul Ronzheimer argued that the U.S. election should not compel Germany to hold its government coalition together at all cost. “The government coalition might signal a lot of things, but certainly not stability,” Ronzheimer argued. Months of internal disputes had already damaged the reputation of Scholz’s government at home and internationally, he said, adding that the country should rather seek to “break free” than continuing on its current path.

In an opinion piece for the Süddeutsche Zeitung, correspondent Michael Bauchmüller said Lindner’s leaked paper would amount to “stepping backwards” in energy and climate terms. Policies proposed in the document would lead to higher energy prices for businesses and for households and “completely defang Germany’s climate policy.” Contrary to what the FDP minister’s paper promised, it would generate neither growth nor lead to “intergenerational fairness”. “Markets of the future are just not going to be fossil fuel-based,” Bauchmüller said with a view to Lindner’s ideas to keep on developing combustion engine technologies and running down renewable energy expansion support.

However, in an article by newspaper Tagesspiegel, economist Manuel Frondel said some of Lindner’s proposals made perfect sense, for example scrapping the national target of achieving climate neutrality by 2045 and replace it with the EU target 2050. “This is very prudent, because it saves a lot of costs,” the researcher of institute RWI said. Pursuing vanguard policies that make the country’s economy less competitive would not become emulated, Frondel warned.

By contrast, economist Marcel Fratzscher, head of institute DIW, called Lindner’s climate policy ideas “completely wrong and very damaging.” If Germany slowed down its expansion of renewbale power sources, the country would end up depending on more fossil fuel imports for a longer time. “This would lead to higher power prices and accelerate de-industrialisation,” Fratzscher said.