Why has the government collapsed and what comes next?

Olaf Scholz's sacking of his finance minister has plunged Europe's largest economy into considerable uncertainty

- Kate Connolly

Germany’s three-way coalition, the “traffic light” alliance of centre-left Social Democrats (SPD), Greens and free-market liberal Free Democratic party (FDP), has collapsed after three years, following a lengthy dispute over how to stop a multibillion-euro hole in next year’s budget, plunging Europe’s largest economy into a period of considerable uncertainty.

What just happened in Berlin?

The chancellor, Olaf Scholz of the SPD, sacked his finance minister, Christian Lindner, the FDP leader, on Wednesday night after months of disagreement over how to deal with the gaping hole in Germany’s budget.

Scholz wants to boost spending by taking on more debt, citing the impact of Russia’s invasion of Ukraine. Lindner opposed this and insisted instead on an array of tax and spending cuts that the SPD and Greens said were impossible to accept as they would torpedo much of the government’s programme. At stake: welfare payments, climate emergency measures and support for Ukraine (Germany is its second biggest backer after the US).

Whether Scholz called Lindner’s bluff by sacking him before he walked is up for discussion. Both men have vented their anger towards each other, with Scholz accusing Lindner of being “small-minded” and “egotistical” and failing to see the bigger picture – namely huge geopolitical challenges. Lindner accuses Scholz of “trivialising” the concerns of ordinary Germans.

What happens now?

Federal elections scheduled for next autumn are likely to be shifted forward by about six months, to March or April.