Germany needs a government capable of acting as soon as possible

German Chancellor Olaf Scholz has dismissed finance minister Christian Lindner and announced a vote of confidence for January.

Commenting on the coalition collapse, ZEW President Professor Achim Wambach remarks:

“Germany cannot afford a politic standstill, in view of the considerable problems facing the country. The government set out to reconcile the transition to climate neutrality with economic growth and social policy in Europe – to achieve a socio-ecological market economy. It has not lived up to this aspiration. The economy is stagnating and investments are not materializing.

This daunting task has been compounded by geoeconomic tensions: the wars in Europe and the Middle East as well as the adverse economic effects of tariffs and national subsidy policies.

The election of Donald Trump has exacerbated the situation. Europe has to step up its action on security and will have to prepare for higher tariffs. There will also be pressure on climate policy as the US economy grows under Trump and emissions only slightly decrease, while Europe’s economy will stagnate.

These problems don’t disappear because the coalition has collapsed. It’s also short-sighted to think that adhering to the debt cap will be the solution. The debt brake has triggered the coalition collapse, but it’s not its root cause.

Germany needs a government that is capable of acting as soon as possible and that reduces climate policy to an efficient level. A government launching an infrastructure investment programme which also involves private capital and facing the challenges of Europe’s economic resilience and security together with the European partners without jeopardizing financial stability.”