Germany's Chancellor Olaf Scholz is under pressure to trigger a new election, after the coalition government collapsed on 6 November after Scholz fired his finance minister.

German opposition parties and business groups on Thursday urged Chancellor Olaf Scholz to trigger a new election quickly to minimise political uncertainty after his rocky three-way coalition collapsed.

The coalition fell apart on Wednesday when years of tensions culminated in a row over how to plug a multi-billion-euro hole in the budget and revive Europe's largest economy, headed for its second year of contraction.

The break-up creates a leadership vacuum at the heart of the European Union just as it seeks a united response to Tuesday's election of Donald Trump as U.S. president on issues ranging from possible new U.S. trade tariffs to Russia's war in Ukraine and the future of the U.S.-led NATO alliance.

The chancellor said he would hold a confidence vote in January, which he would probably lose, triggering a new election by the end of March - six months ahead of schedule.

Friedrich Merz, leader of the opposition conservatives, who are leading in nationwide polls, called for a vote of confidence "by the beginning of next week at the latest", in comments echoed by other opposition parties.

An election could take place in late January, he said.

"We simply cannot afford to have a government without a majority in Germany for several months now, followed by an election campaign for several more months and then possibly several weeks of coalition negotiations," Merz told reporters.

Scholz, of the centre-left Social Democrats (SPD), said he had fired his finance minister, Christian Lindner of the fiscally conservative Free Democrats (FDP), for obstructing a resolution of budget disputes.

The last straw was his opposition to Scholz's plan to ease debt limits in order to increase support for Ukraine in the 2025 budget by 3 billion euros ($3.25 billion).

Lindner's dismissal led to the FDP quitting the coalition, leaving Scholz's SPD and the Greens running a minority government and relying on cobbled-together majorities to pass any substantial measures in parliament.

A meeting between Scholz and Merz on Thursday failed to solve the impasse, a government source said.

Joerg Kukies, a top official in the chancellery and close SPD ally of Scholz, will be named finance minister.

The crisis comes at a critical juncture for Germany, with a flatlining economy, ageing infrastructure and an unprepared military. It is likely to deal another blow to consumption and investment in coming months even as Trump's return threatens to dampen exports, economists said.

The FDP's exit is likely to spell the departure of the government's transatlantic coordinator, who has spent months cultivating ties with senior U.S. Republicans in preparation for a possible Trump return to the White House.

But the crisis could also be a long-term blessing given the tensions that have plagued the coalition, the first of its kind at national level, said ING economist Carsten Brzeski.

"Elections and a new government could and should end the current paralysis of an entire country and offer new and clear policy guidance and certainty," he said.
 

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