Germany's Governmental Crisis Explained

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Published on 11/13/24

The German government went into major upheaval on November 6th when its Chancellor, Olaf Scholz,  a member of the Social Democrats party in Germany, fired the country's Finance Minister, Christian Lindner, a member of the Free Democratic party. Although there is a coalition in the German government between the Social Democrats, Free Democrats, and the Green Party, Lindner was still let go. You may be wondering why the German government cannot operate without its Finance Minister--so, let me explain the makeup of the country's government to shed some light on the situation:

There are some similarities between the governmental systems and structures between the United States and Germany, but there are as many, if not more, major differences between the two. For starters, Germany is a parliamentary democracy, with a chancellor instead of a presidential head-of-state in terms of political power. There is a presidential position in Germany, but the position of chancellor holds the most political power in the country. 

However, even with that major difference, Germany has a system of checks and balances realized through its executive, legislative, and judicial branches,--just like the United States. The German Parliament has a total of 733 seats and is made up of 9 political parties (including the Independents). The three parties with the most seats in Parliament are the Social Democrats (207 seats), Christian Democrats (153 seats), and the Green Party (117 seats). As mentioned previously, the current ruling coalition in Germany's Parliament are the Social and Free Democrats, along with the Green Party.

Germany as a country has the third-highest GDP in the world, falling well-behind China in second place, but is still far-below the United States, which has the most valuable GDP in the world. Germany is the third-largest exporting economy in the world, with its main trading commodities being its motor vehicles and chemical products. Because of its exporting prowess, it has become a hub for domestic and international investing, leading to its position as one of the strongest economies in the world while being a relatively small country compared to the rest of the globe.

German Parliamentary elections are held every four years, with state elections in the country (16 of them in total) conduct elections every five years, but those typically consist of low-level positions. I attached a picture below creating a flow chart of how the German government works with elections at all levels.

Now, let's get into the future of Germany. The country's economic outlook has greatly contributed to the coalition's breakup. The German economy has been facing uncertainty and a possible recession. The proposed tariffs by the incoming Trump Administration had an impact on this prognostication, as many economic experts predict that the potential policy by the U.S. to have a major negative impact within the European continent. However, the dismantling of the leading coalition ironically has led to some stability within the German economy, as it is thought that higher government spending will result from this fallout, creating some shorter term economic steadiness.

In terms of the current and upcoming government structure, the country will be placed in a temporary stage of limbo. Chancellor Scholz has requested that a vote of confidence for the current government be held on December 16th. It is expected that the Scholz regime will lose this vote, allowing for the country's current President, Frank-Walter Steinmeier, to set a date for elections to be held. Following this, Walter-Steinmeier will break up the current iteration of Germany's Parliament, the Bundestag, over a three-week-period.

Although Scholz's regime will be broken up relatively quickly, the ensuing elections won't be held until either February or March--which is much earlier than the original timeline of September, but still a long time for a lame-duck government. This usually wouldn't be an issue, but because the current coalition has dissolved, there is no longer a majority in the Bundestag, leaving Chancellor Scholz's regime to be on an island. Until the elections have been conducted and a new majority/coalition is created, Scholz's party and the Bundestag as a whole has no ability to pass laws, which could lead to major issues in the country, especially when considering the internal and external economic uncertainty that Germany will have to deal with in a timely manner.

Germany's governmental crisis will ultimately be rectified. However, timing is the most important factor in this situation. If elections can be held in early 2025, the new iteration of Parliament can likely regain control of the economic situation in the country. Until then, there will be much uncertainty, as the population will have all of its attention on a legislative body that will essentially be frozen. It will be interesting to see not only how Germany corrects its domestic issues, but how it will decide to interact with the United States moving forward.