Political Earthquake in Germany: Scholz Fires Finance Minister Lindner

Germany is plunged into a political crisis. The three-party government coalition consisting of the Social Democrats (SPD), Liberal Democrats (FDP), and Greens is in doubt following Chancellor Olaf Scholz’s decision to sack Finance Minister Christian Lindner (pictured). The sensational news was published on the evening of Wednesday, November 6, by a number of reputable newspapers, including Bild and Welt.

The radical decision was taken by Scholz after Lindner put forward a proposal to call new elections in Germany “as soon as possible.” According to Bild, Lindner said this during a summit of the ruling coalition’s trio of parties held in Berlin to avoid a government crisis and find agreement on the country’s economic and financial policies. According to reliable sources in the German Finance Ministry, “in the absence of reforms, Lindner is ready to leave the coalition government, which would lead to its downfall.” Scholz, seconded by Economy Minister Robert Habeck, flatly rejected Lindner’s proposal to call a new election.

Following Lindner’s move and Scholz’s response, the ruling coalition in Germany appeared to be “on the verge of collapse” if the Social Democrats and the Greens fail to find a compromise on the proposals put forward by the former finance minister. According to Lars Feld (FDP), economic advisor to former Finance Minister Lindner, director of the Walter Eucken Institute and professor of economic policy at the University of Freiburg, “the proposal document submitted by Lindner is not just another document aimed at another election campaign. If no compromise can be reached with the SPD and the Greens, who will implement a substantial part of the proposals put forward, the ruling coalition will come to an end.”

The political crisis threatens to dramatically worsen the economic situation in Germany, where in October 2024, “the number of people or companies declaring bankruptcy increased by 48% compared to the same month last year.” According to a study published by the Leibniz Institute for Economic Research (IWH), the number of bankruptcies of German companies “rose sharply” in October. According to statistics compiled by IWH, 1530 companies filed for bankruptcy last month, the highest number for that month recorded in the last 20 years. German experts have explicitly defined the situation in Germany as “a perfect storm, characterized by prolonged economic weakness and soaring costs, putting more and more companies in a difficult situation.”