Germany appears headed toward an unexpected election — and complete political upheaval — after its deeply unpopular ruling coalition collapsed this week.

Until Wednesday, Germany, which operates under a parliamentary system in which multiple parties compete for power, was governed by a fragile coalition of three parties with very different aims. That arrangement changed after Chancellor Olaf Scholz (who belongs to the party that led the coalition, the center-left Social Democratic Party) fired his finance minister, who belongs to the fiscally conservative Free Democratic Party, over a budget dispute.

In response, the Free Democratic Party pulled out of the coalition, leaving the Social Democratic Party and its other coalition partner, the climate change-focused Green Party, without a majority in the Bundestag, Germany’s parliament. For the time being, the two parties will still govern the country, but it will be difficult to pass legislation.

As a result, Germany faces political gridlock. Scholz has said he would call a vote of confidence in his government in January. He and the Greens are expected to lose, which would trigger an early election and likely elevate different parties and politicians to leadership positions, significantly shifting the course of German politics.

How did things get so chaotic in Germany?

The three-party coalition was troubled nearly from the beginning.

Scholz has never been particularly popular, and his party has been steadily losing ground to the right-wing Alternative for Germany (AfD), as well as to other minority parties in both European Parliament and state elections.

The other issue the coalition faced was that German economic growth has been slow for years, struggling to rebound from the Covid-19 pandemic. That’s primarily because the German auto industry is threatened by Chinese electric imports and decreased demand. German energy costs have skyrocketed following sanctions on the cheap Russian fuel the country relied on prior to Russia’s invasion of Ukraine.

After no party won a majority back in 2021, the coalition members — each with a very different approach to spending — agreed to work together “based on the assumption that they had a pretty generous budget from leftover coronavirus funds,” credit secured to finance the country’s pandemic response, Liana Fix, a fellow for Europe at the Council on Foreign Relations, told Vox.

The plan was for “Social Democrats to give social welfare to their constituencies, for the Liberals to reduce taxes for business owners, and for the Greens to do climate projects,” in line with their parties’ priorities, Fix said.

But the German constitutional court ruled earlier this year that the emergency Covid-19 funds couldn’t be used for other priorities, leaving a multibillion-euro hole in Germany’s budget.

Adding to this problem is that Germany has a constitutionally set level of debt it isn’t supposed to exceed. Scholz wanted to raise that debt level, in part, to surge aid to Ukraine during its war with Russia. Christian Lindner, the fired finance minister, said that to do so would be tantamount to “violating my oath of office.”

Opposition parties have called for rapid action to form a new government, particularly given that US President-elect Donald Trump takes office in January. He has threatened tariffs that could further damage Germany’s economy. Scholz’s proposed timetable for elections wouldn’t allow a new government to be formed before June. Once it is formed, he and the Social Democratic Party will likely find themselves voted out of power.