Another election on the horizon… in Germany? Let’s unpack what’s brewing and driving the move in Bunds. Chancellor Scholz dismissed Finance Minister Christian Lindner (FDP) yesterday, effectively shattering the already fragile coalition. The market’s reaction on Dax says it all: investors have grown so pessimistic on Germany that even political upheaval barely raises an eyebrow. The reality is that discontent with the coalition has been simmering, and many Germans are ready for a shake-up. So, who’s going to step in to fix the stagnating economy?

The odds are tilting toward a CDU/SPD coalition, with polls previously showing around 35% for CDU and 15% for SPD. But that was before Scholz’s bombshell move and Trump’s re-entry into the U.S. political arena, which could push CDU support higher as Germans pivot toward “stability.” CDU/SPD is seen as a stabilizing force amid chaos. However, SPD has signaled they want to wait until the end of March for any snap election, meaning months of political limbo – Germany and the EU effectively in “pause mode.” This power vacuum only strengthens Trump’s hand on the international stage, especially regarding any potential endgame in Ukraine. The German opposition leader calls for a confidence vote already this or next week, meaning snap elections already in early January. This leans against the ambition of SPD and Greens to wait for the confidence vote until mid of January. Chancellor Scholz and CDU leader Merz have just started conservations, which can shed light on the timing of potential snap elections as well as the path forward of a German coalition.