Germany's shrinking federal budget will increase tensions within its coalition government and exacerbate political gridlock in Berlin, leading to policy uncertainty at the national and EU level. On May 23, Germany's government postponed parliamentary discussions on a contested piece of climate legislation over fundamental disagreements between the three coalition partners. This episode underscored the ongoing tensions and difficult coexistence between Chancellor Olaf Scholz's center-left Social Democratic Party (SPD), Finance Minister Christian Lindner's pro-business Free Democratic Party (FDP), and Economy Minister Robert Habeck and Foreign Minister Annalena Baerbock's pro-environment Greens party. The three ruling parties had already agreed to the law, which would effectively ban new oil- and gas-powered heating systems in German houses in favor of electric heat pumps, at the Cabinet level at the end of March. However, the FDP decided to block the proposal before it could go to parliament for a first reading, calling for a major...
