BERLIN: As German Chancellor Olaf Scholz battles political turmoil, his vice chancellor warned on Monday that a collapse of the coalition government now would come “at the worst possible time”.

“The government is in troubled waters,” Robert Habeck acknowledged as the government has been rocked by infighting between Scholz´s Social Democrats, Habeck´s Greens and the liberal Free Democrats.

But he warned that “this is the worst time for the government to fail… given what is happening in Ukraine, with regard to the economic situation in Germany, with regard to the American election”.

Habeck, who is also economy and climate minister, spoke after coalition crisis talks at the chancellery with Scholz and Finance Minister Christian Lindner of the Free Democrats. The leaders of the three-party coalition, which has taken a dive in opinion polls, have been arguing for weeks about how to revive Germany´s stuttering economy.

The Social Democrats, Germany´s traditional workers party, advocate fair wages and social welfare, the Greens´ top priority has long been climate and the environment, and the Free Democrats are demanding pro-business policies and an easing of administrative rules and processes.

A crunch point is approaching as all three must agree by the middle of this month on a budget for 2025, with more meetings set for this week and next. In recent weeks Lindner has repeatedly warned that the tough negotiations ahead would make for “an autumn of decisions”, potentially leading to early elections before the scheduled date of September 28, 2025.

Habeck voiced optimism, saying that resolving the differences over the budget “is not a small challenge, but it is a challenge that can be met”. The three-way coalition that took over from Angela Merkel in 2021 is deeply split on how to revive Europe´s biggest economy, which is expected to shrink for a second year in a row.

While Habeck recently proposed a multibillion-euro plan to support German business, Lindner has insisted to the other parties that public spending must be reined in. Lindner has also called for an end of the “solidarity tax” introduced in 1991, initially to finance the cost of German reunification, and for Berlin to scale back its ambitious climate targets.

Scholz has asked his governing partners to be ready to compromise, with a focus on helping “the economy and jobs”. “It´s about pragmatism, not ideology,” he posted on X. “Coalition governments are sometimes challenging. But the government has been elected and there are tasks that need to be solved. “We need to work seriously to achieve this.”