The government is on the verge of collapse after the sacking of a key minister

Germany's ruling coalition collapsed after Chancellor Olaf Scholz fired a key minister and said he would call a vote of confidence in his government early next year.

Scholz said he does not trust Finance Minister Christian Lindner, who leads a rival group that was part of a coalition with the Social Democrats and Scholz's Greens.

This move means that Scholz's government no longer has a majority in parliament. A vote of confidence could lead to early elections in March.

The so-called “traffic light” coalition led by the chancellor has been in control of Germany since 2021.

But internal tensions had been simmering for weeks before they erupted into the open on Wednesday night.

Scholz said the former finance minister “didn't trust him” and put his party's interests above those of the country.

He added that Germany must show that it can be trusted by other countries, especially following the election of Donald Trump in America.

Lindner, who leads the FDP, accused Scholz of “leading Germany into a phase of uncertainty”.

The crisis within the alliance plunged Europe's largest economy into political chaos, hours after Trump's election created deep uncertainty about the continent's economic and security future.

When a coalition between the chancellor's center-left Social Democrats, the environmental Greens and the economically liberal FDP was formed in 2021, each party planned to spend heavily on its key parties.

However, Russia's full-scale invasion of Ukraine in 2022 sent energy prices soaring, and left Germany facing rising defense costs — and the cost of taking in 1.5 million Ukrainian refugees.

Germany is now facing a second year without economic growth.

Scholz and his Green colleagues want to deal with this by loosening the constitutional rules on public debt to allow more spending. Lindner wants to pay for tax cuts by cutting the social and welfare budget and rolling back environmental targets.

Economy Minister Robert Habeck of the Greens said the party will not leave the government and its ministers will remain in office.

Scholz announced that a vote of confidence will be held in the German parliament, the Bundestag, on January 15.

If MPs vote down the government, the country will hold new elections in a few weeks, instead of the planned date in September.

However, the opposition could force Scholz out early if he gets a majority for another chancellor.

For now, Scholz will lead a minority government made up of the Social Democrats and the Greens – the second largest party in the coalition.

Without a parliamentary majority, Scholz's coalition will need to rally the support of individual votes from other parties to pass laws and measures.

Scholz said he would ask Friedrich Merz – leader of the opposition Christian Democratic Union (CDU) – for support in passing a budget to help Germany's faltering economy and increase military spending.

The FDP's departure from the coalition also means that four other FDP ministers will leave their positions with Lindner – the ministers of justice, transport and education.

Scholz is expected to name Lindner's replacement.