UPDATE: Scholz loses confidence vote in German parliament

The Bundestag vote, which Scholz had expected to lose, allows President Frank-Walter Steinmeier to dissolve the legislature and formally order an election.

The crucial vote followed a fiery debate in which political rivals traded angry recriminations in a foretaste of the election campaign to come.

Scholz, 66, outlined plans for massive spending on security, business and social welfare, but Merz demanded to know why he had not taken those steps in the past, asking: "Were you on another planet?"

Scholz argued that his government had made great progress over the past three years, including boosting spending on the German armed forces, which he said previous CDU-led governments had left "in a deplorable state".

"It is high time to invest powerfully and decisively in Germany," Scholz said, warning about Russia's war in Ukraine that "a highly armed nuclear power is waging war in Europe just two hours' flight from here".

But Merz fired back at Scholz that he had left the country in "one of the biggest economic crises of the postwar era".

"You had your chance, but you did not use it ... You, Mr. Scholz, do not deserve confidence", charged Merz.

Scholz also lashed out at Lindner for the "weeks-long sabotage" that imploded the alliance and damaged "the reputation of democracy" itself.

The departure of Lindner's FDP left Scholz running a minority government with the Greens that has been limping along, unable to pass major bills or a new budget.

Following the vote, President Frank-Walter Steinmeier can move to dissolve the legislature and formally declare the agreed February 23rd election date.

READ ALSO: What now as German Chancellor Scholz loses vote of confidence?

Minority government

The political contest comes at a time when Germany is struggling to revive its stuttering export-led industrial sector amid high energy prices and tough competition from China.

Berlin also faces major geopolitical challenges as it confronts Russia over the Ukraine war and as Donald Trump's looming return to the White House heightens uncertainty over NATO and trade ties.

Merz, a former corporate lawyer, long rained withering fire on the motley alliance of the chancellor's Social Democrats (SPD), the left-leaning Greens and the liberal Free Democrats (FDP).

Coalition bickering over fiscal and economic woes came to a head when Scholz fired his rebellious FDP finance minister Christian Lindner on November 6th, the very day Trump was re-elected.

The departure of Lindner's FDP left Scholz at the helm of a minority government with the Greens.

Unable to pass major bills or a new state budget without opposition support, the government is now limping along, with all sides in election mode.

READ ALSO: How new German citizens can vote in upcoming elections

Plagued by doubt

German politics in the post-war era was long staid, stable and dominated by the two big-tent parties, the CDU-CSU and the SPD, with the small FDP often playing kingmaker.

The Greens emerged in the 1980s, but the political landscape has been further fragmented over the past decade by the rise of the far-right Alternative for Germany (AfD), a shock for a country whose dark World War II history had long made far-right parties taboo.

The AfD grew from a eurosceptic fringe party into a major political force when it protested against Merkel's open-door policy to migrants, and now has around 18 percent voter support.

While other parties have committed to a "firewall" of non-cooperation with the AfD, some have borrowed from its anti-immigration and anti-Islam rhetoric.

After the fall of Syrian president Bashar al-Assad, some CDU lawmakers were quick to demand that the around one million Syrian refugees in Germany return to their home country.

The election is all the more heated as it comes at a time "the German model is in crisis," said Berlin-based political scientist Claire Demesmay, of Sciences Po Paris.

Germany's prosperity "was built on cheap energy imported from Russia, on a security policy outsourced to the USA, and on exports and subcontracting to China", she told AFP.

Demesmay said the country was now in a sweeping process of reorientation which is "feeding fears within society that are reflected on the political level".

"We can see a political discourse that is more tense than a few years ago. We have a Germany plagued by doubt."

READ ALSO: Inside Germany - Vote of confidence, Bordbistro changes and 20 years of Berghain

"We can see a political discourse that is more tense than a few years ago. We have a Germany plagued by doubt."

By Frank ZELLER