Germany can’t balance its budget. Now its government is in free fall.

German opposition parties and business groups on Nov. 7 urged Chancellor Olaf Scholz to trigger new elections quickly after his rocky three-way coalition collapsed and plunged the country into political turmoil.

The coalition fell apart on Nov. 6 when years of tensions reached their peak in a disagreement over how to plug a multi-billion-euro hole in the budget and how to revive Europe’s largest economy, which is headed for its second year of contraction.

The break-up creates a leadership vacuum at the heart of Europe just as it seeks to form a united response to the Nov. 5 election of Republican Donald Trump to a second term 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 NATO alliance.

Mr. Scholz delayed his departure for the European Union summit in Budapest on Nov. 7 due to the crisis at home and canceled his attendance at the next United Nations climate change summit.

Mr. Scholz, of the center-left Social Democrats (SPD), said he fired his finance minister from the fiscally conservative Free Democrats (FDP) for opposing his plan to suspend the debt brake again in order to raise more funds for Ukraine and the economy.

That led to the FDP withdrawing from the government, leaving Mr. Scholz’s SPD and the Greens. The chancellor said he would hold a confidence vote in January, which he would likely lose, triggering new elections by the end of March – six months ahead of elections originally scheduled for September.

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

Friedrich Merz, leader of the opposition conservatives who are leading in nationwide polls, called for a vote of confidence immediately, “by the beginning of next week at the latest.”

Elections could take place in the second half of January next year, Mr. Merz said. His comments were echoed by other opposition parties.

“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,” he told reporters.

“Time is of the essence.”

The FDP’s exit will likely also spell the departure of the government’s transatlantic coordinator who has spent months cultivating ties with senior U.S. Republicans ahead of the prospect of a Trump return to the White House.

German industry, reeling from high costs and fierce Asian competition, also urged Mr. Scholz’s government on Nov. 7 to arrange snap elections as soon as possible.

“Especially in these challenging times, we need a solution-oriented federal government capable of taking action,” said Wolfgang Grosse Entrup, who heads the VCI lobby group for Germany’s key pharma and chemicals sector. “We cannot afford a months-long standstill and political deadlock.”

Blessing in disguise?

Mr. Merz said he would press Mr. Scholz to speed up the confidence vote in his meeting with him on Nov. 7.

Mr. Scholz may have to heed those calls given that, due to his coalition’s demise, he will have to rely on cobbled-together parliamentary majorities to pass any serious measures.

The political crisis comes at a critical juncture for Germany, with a flatlining economy, aging infrastructure, and an unprepared military. It is likely to deal another blow to consumption and investment in coming months, economists said.

But the crisis could also be a “blessing” in the long-run given the tensions that had plagued this 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.

Still the rise of both leftist and rightist populist parties in Germany, as elsewhere in Europe, however, means that even with new elections, the country could struggle to form a coherent coalition with a strong parliamentary majority.

“You don’t have to be a clairvoyant to deduce ... that things will not automatically become easier in the future, even after the next election,” said Economy Minister and Vice Chancellor Robert Habeck of the Greens.

This story was reported by Reuters. Reuters writers Rachel More, Matthias Williams, Holger Hansen, Andreas Rinke, and Sarah Marsh contributed to this report.