Published : 4 weeks ago, on 12/11/2024

By Andreas Rinke and Rachel More

BERLIN (Reuters) -Germany is set to hold fresh elections on February 23, eleven weeks after the collapse of Chancellor Olaf Scholz’s governing coalition, with sources on Tuesday saying he could ask parliament to vote him out of office on Dec. 16.

The date is a compromise between the conservative opposition, who wanted a vote in January for fear of leaving Germany rudderless at a time of economic and diplomatic crisis, and Scholz, who wanted a mid-March election to give authorities and parties more time to prepare.

Inflation, Russia’s invasion of Ukraine, intensifying competition from China and U.S. President-elect Donald Trump’s return have combined to create a perfect storm for Germany, whose economy, Europe’s largest, prospered from abundant energy, and a benign, pro-trade international political environment.

Reflecting that, the ZEW institute’s investor morale index collapsed on Tuesday to 7.4 points, from 13.1 points in October, a much sharper drop than analysts had expected.

“The outcome of the U.S. presidential election is likely to be the main reason for this,” said ZEW President Achim Wambach.

A government with a clear majority would be better able to broach topics like Germany’s debt brake, blamed by many economists for the country’s low investment rate, or to make money available for strategic industries.

Friedrich Merz, leader of the Christian Democrats and favourite under current polls to become chancellor, has so far ruled out scrapping the debt brake. On Tuesday, he promised a major tax reform.

“It is important that we get new elections as soon as possible,” Carsten Linnemann, general secretary of Merz’s Christian Democrats, told public TV before the date became known.

The Greens’ parliamentary co-leader Briotta Hasselmann said her party would be prepared to discuss passing measures floated by Scholz, such as tax cuts ahead, before parliament’s dissolution.

The Dec. 16 vote, at which parliament will express its lack of confidence in Scholz, is the trigger that will allow President Frank-Walter Steinmeier to call new elections.

Scholz, who for now runs a minority government with the backing of the Greens, hopes to secure enough opposition support to pass laws to protect the Constitutional Court from the far-right and to boost funding for Ukraine before leaving office.

His government collapsed after months of wrangling between the two remaining parties and their erstwhile coalition partner, the neoliberal Free Democrats, who demanded spending cuts on a scale their left-wing partners were unwilling to countenance.

Merz’s conservatives have a wide lead in the polls, but in an era of high voter volatility, both the SPD and the Greens are insisting, at least publicly, they can recover enough ground over the coming three months to pip Merz at the post.

(Reporting by Andreas RinkeWriting by Thomas EscrittEditing by Friederike Heine and Christina Fincher)