By Andreas Rinke, Christian Kraemer and Sarah Marsh

BERLIN (Reuters) – Chancellor Olaf Scholz announced this month a summit of industry leaders to discuss ways to save Germany’s ailing economy.

A week later, the German Minister of Economy presented his own proposals. The finance minister then announced that another economic summit would take place on Tuesday, the same day as Scholz’s.

None of the announcements were coordinated with each other, nor received mutual approval, in a cacophony underscoring the growing dysfunction within Germany’s ideologically disparate coalition of the center-left Social Democrats (SPD ), the Free Democrats (FDP) and the Greens.

Campaigning for next year’s federal elections appears to have already begun unofficially, pitting the three parties in Scholz’s coalition against each other, according to senior party and government officials. The risk of it collapsing is higher than ever.

Panic within parties over dismal performance in recent regional elections, which saw the FDP and Greens withdraw from some regional parliaments, has them pressuring their leaders to compromise less and do better advance their own agendas.

The FDP in particular, which currently votes nationally below the 5% threshold needed to enter the federal parliament, poses a flight risk. The party has been wondering for weeks whether it has a better chance of improving its profile inside or outside government, senior FDP sources told Reuters.

FDP leader and Finance Minister Christian Lindner does not want to blow up the coalition but faces growing pressure within his party, said a government official who requested anonymity. “It all depends on Lindner.”

Until recently, analysts considered that the poor ratings of the three coalition parties discouraged them too much from running for new elections. They also fear being punished for having abdicated their responsibilities, particularly in the context of the wars raging in Europe and the Middle East.

But the FDP could hope to gain votes to end an increasingly unloved and ineffective coalition, said Stefan Marschall, a political scientist at the University of Düsseldorf.

DECISION TIME

Lindner called it the “autumn of decisions,” saying the government must agree to significant measures to stimulate the economy and close the budget deficit.

“Stability for Germany is of paramount importance,” Lindner told the Table Briefings newspaper this month. “But at some point the government itself may be part of the problem.”

No longer pulling his punches, Lindner called policy proposals announced last week by Economy Minister Robert Habeck of the Greens to encourage investment through tax breaks a “sign of conceptual impotence.”

“Will the coalition’s stalemate now be followed by an open exchange of blows? Should this last another year?” asked Friedrich Merz, leader of the main opposition party, the Christian Democrats (CDU), who are calling for early elections.

Scholz rejected this call, saying: “When someone has a mandate, he must work to fulfill his duties.”

The FDP was always an outsider within Scholz’s heavy coalition, which nevertheless united in its early years in the face of an external threat: Russia’s invasion of Ukraine and the energy crisis that followed.

Today, however, the focus is now on reviving an economy that is set to contract for the second year in a row, bringing to the fore the differences between the more fiscally hawkish FDP and the SPD and the Greens, more spenders.

Whether or not they succeed in passing the 2025 budget in parliament will be a litmus test for the viability of the coalition, a senior FDP source said. The budget committee meets on November 14.

“Before this decisive meeting, the government must reach a common agreement, also in light of recent fiscal estimates, on the next steps in economic and financial policy,” the source said. “The next few weeks will be decisive.”

The projected deficit in Germany’s draft budget for 2025 widened to 13.5 billion euros ($14.58 billion) from 12 billion euros due to those estimates, Lindner said last week.

‘NO TRUST’

An FDP government official said a third round of negotiations between Scholz, Habeck and Lindner would likely be necessary.

“The atmosphere is not good at all, there is no more trust,” said the official.

The most likely scenario remains that the coalition remains united until the next federal election on September 28, given hopes that its policies could start to bear fruit and Germany’s propensity for stability, analysts and officials say.

However, new SPD general secretary Matthias Miersch this month raised the possibility of a minority government if the FDP or Greens were to leave the coalition prematurely.

“If the budget has been approved in advance, this will not be a problem,” he said.

However, given the government’s lack of popularity, it will likely find it difficult to resist pressure for new elections. Such a move would require the chancellor to first call a vote of no confidence so that the president can then dissolve Parliament.

One particular external event that could further bring the coalition together is the potential November 5 re-election of former US President Donald Trump, who has threatened to impose high tariffs on imports and condition support for US allies. NATO.

“The world’s third largest economy could not risk finding itself without leadership at a time like this,” said the first government official. “Everyone knows it, even Lindner.”

(Reporting by Andreas Rinke, Christian Kraemer, Sarah Marsh, Alexander Ratz and Holger Hansen; editing by Gareth Jones)