The German traffic light coalition – named for the red Social Democrats (SPD), the yellow market-liberal Free Democrats (FDP) and the green Greens – is history. It collapsed three days ago, late in the evening on 6 November, when Chancellor Olaf Scholz (SPD) fired his Finance Minister Christian Lindner, who is also the head of the FDP. The Free Democrats left the government, leaving the SPD and the Greens to limp along until new elections. Nobody knows quite when these will happen.
Scholz said that the FDP had “Too often shouted down the necessary compromises with publicly staged disputes and loud ideological demands.” He said that Lindner specifically had “broken his trust” by “too often blocking laws for the wrong reasons” and “engaging in small-minded party political tactics.”
Lindner responded that Scholz himself had staged the crisis, pleading that the budgetary concessions Scholz demanded of him would have violated his oath of office.
Thus the most unpopular, ineffective and openly ridiculous government ever to disgrace the Federal Republic of Germany meets its ignominious end. I would love to say that this happened because of Donald Trump’s election or the failure of the energy transition or the migration crisis. That would make this post more exciting. While those things did not help, what crushed these incompetent clowns in the end was something much more mundane: They ran out of money.
The traffic light has been a dysfunctional monstrosity from its inception. It is emblematic of post-Merkel German politics, in which the centre-right Christian Democrats (CDU) have triangulated their way to the left, leaving a great part of their conservative constituents out in the cold. Alternative für Deutschland grew to fill the vacuum, but as the establishment parties refuse to work with them, parliamentary majorities have become an ever scarcer commodity. As long as the cordon sanitaire stands, Germany will have one government after the other like the traffic light, in which politicians with diametrically opposed political philosophies form coalitions for the sheer purpose of denying the rabble their political voice.
The SPD narrowly won the 2021 elections, when the Greens were also near the height of their powers. These two left-wing parties were logical partners, but they did not command a majority. Thus they had to go knocking at the door of the FDP – the only other willing party with enough seats to make the math work. While the FDP represent the interests of fiscal conservatives, the Greens and the Social Democrats love taxes and debt, because taxing people and taking on debt is the only way they can spend money. They had ambitious plans of an accelerated energy transition and of increasing social entitlements. They were going to build 400,000 more apartments. They were going to vomit forth a great wealth of industrial subsidies intended to ease German industry into her glorious post-carbon phase.
To square the circle and get the FDP on board with these fantasies, they hatched a plot that was just a titch too clever: Taxes would stay as they are and there would be no new deficit spending. Instead, the Greens and the SPD would fund their projects by reappropriating unused Covid-era credit authorisations secured under the Merkel government.
In this way, they hoped to avoid Germany’s strict debt brake. Since 2009, our Basic Law holds that budget deficits cannot exceed 0.35% of GDP unless there is some real or imagined emergency like the Covid supercold. Reappropriating emergency Covid credit authorisations for non-emergency renewables and subsidies was always legally doubtful, and the CDU (since 2021 banished to the opposition) sued. Last year, the Federal Constitutional Court in Karlsruhe ruled their budget trickery unconstitutional. This deprived the coalition not only of their money, but also of their entire purpose and reason for being.
Since that ruling in November 2023, the traffic light has been dead in the water. They’ve had to stand by as energy prices have skyrocketed and watch impotently as they became the most reviled government in the history of the Federal Republic. They have had to endure their repudiation in the European elections and then their total humiliation in the state elections in Thüringen, Saxony and Brandenburg.
The Greens and the SPD wanted to stop the bleeding by declaring a new emergency to evade the debt brake so they could get back to spending money. The war in Ukraine was the perfect occasion. The FDP, however, would not agree. Christian Lindner insisted that judges would never buy this pretence and that it was unconstitutional. Probably he could no longer agree to the deficit spending scheme even if he wanted to. As bad as the traffic light had been for the Greens and the Social Democrats, it had all but destroyed the FDP, and the internal pressure on him was immense.
In an effort to save himself and make his party relevant again, Lindner last week submitted to his coalition partners an 18-page manifesto for achieving an “economic turnaround” in Germany. It was an outright attack on the entire political programme of the SPD and the Greens. He called for tax reductions, an end to Green industrial subsidies and delays to Green energy transition schemes.
These were demands to which the SPD and the Greens could not agree. Publicly, Lindner tried to backtrack, insisting that his paper was only the starting point for negotiations. Behind the scenes, though, he took a harder line, demanding substantial concessions from his leftist partners. Finally, Chancellor Scholz had enough. He demanded that Lindner, as his Finance Minister, sign off on his emergency debt brake evasion scheme. When Lindner refused, Scholz sacked him, and the government that was dead in spirit finally died also in body.
