German government on brink of collapse as Scholz sacks 'small-minded' finance minister after furious tirade

It comes after years of tensions in the three-way alliance between Scholz's Social Democrats (SDP), the Greens and the FDP reached their peak in a row over economic and fiscal policy.

Scholz would have to rely on cobbled-together parliamentary majorities to pass legislation and he plans to hold a parliamentary confidence vote in his government on January 15, which could trigger snap elections by the end of March.

Scholz said he would ask Friedrich Merz, leader of the opposition conservatives who are far ahead in polls, for support in passing the budget and boosting military spending. Merz is due to respond in a news conference later today.

Economy minister Robert Habeck of the Greens said that Scholz was right to fire the minister, and insisted that Germany was still capable of functioning, saying: "In this respect, the Chancellor's decision was a logical one. It was consistent and necessary at this point."

He added that Lindner of the fiscally conservative FDP had been unable to complete the fundamental task of forming a budget and lost the respect of the other cabinet members.

Scholz told a press conference he fired Lindner for his obstructive behaviour on budget disputes, accusing the minister of putting party before country and blocking legislation on spurious grounds.

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A political shake-up could fuel growing frustration with Germany's mainstream parties to the benefit of younger populist movements, including the anti-immigrant hard-right Alternative for Germany (AfD).

Scholz's coalition has been at odds over how best to rescue the German economy, which is facing its second year of contraction and a crisis in its economic model after the end of cheap gas from Russia following its 2022 invasion of Ukraine and amid increasing competition from China.

The Chancellor said he had proposed capping energy costs for companies to bolster Germany's appeal as a place to do business. He wanted a package to help save jobs in the ailing auto industry, as well as increased support for Ukraine.

Meanwhile, the FDP had proposed public spending cuts, lower taxes and less regulation as the answer to the malaise. It also wants to slow Germany's shift to a carbon-neutral economy.

Sholz's SPD and the Greens, while at odds on some issues, agree that targeted government spending is needed. The three other FDP ministers, for transport, justice, and education, all voluntarily left the government.

Scholz said Lindner was focused on the short-term survival of his own party. "Especially today, one day after such an important event as the US elections, this kind of selfishness is utterly incomprehensible."

President-elect Donald Trump said during his election campaign that he would impose a 10 per cent tariff on imports from all countries, and Germany would be the big loser if a Trump presidency sparked a tit-for-tat trade war between the United States and Europe.