Germany: Scholz alone at home

The dismissal of finance minister Lindner by Chancellor Scholz has led to the collapse of the German government at a rather inopportune time . That said, the in - fighting in the coalition had reached a point at which little common ground was left. The Chancellor is aiming at this point for early elections in March next year and to lead a minority government until then . It is conceivable that he still may find a majority in parliament for some of the pending laws already agreed by the coalition. It is also certain that all mainstream parties would support the government in case of a national emergency. Thus, the current minority government would have some , limited , room for maneuver. The opposition, not surprisingly, is demanding earlier elections , though it could only initiate a vote of confidence if it could at the same time present a candidate for Chancellor that would have a majority in parliament. Given that no party would be willing to rely on the support of the extreme-right AfD, such a scenario seems very unlikely. At the core of the confli c t between the coalition partners was the question to what extent fiscal policy should be used to address the structural challenges the German economy faces. While the constitutional “debt brake” puts a rather strict limit on discretionary spending, the strong fiscal position of the German government would in principle allow an aggressive fiscal expansion. This question needs to be again addressed by the next government and we see a possibility of “ some ” adjustment of the debt brake.