German parties at loggerheads over budget at start of coalition crunch week | U.S. & World [Video]

By Andreas Rinke and Christian Kraemer

BERLIN (Reuters) -A senior figure in Germany’s smallest coalition party declined to rule out a government collapse, challenging bigger parties to change course on budgetary policy at the start of a make-or-break week for Chancellor Olaf Scholz’s tottering cabinet.

Bijan Djir-Sarai, general secretary of Finance Minister Christian Lindner’s Free Democrats, told reporters after a party leadership meeting the interventionist policies of Greens economy minister Robert Habeck had failed.

Asked whether the government could fall at Wednesday’s coalition meeting if it did not adopt the FDP’s prescription of lower tax and spending, Djir-Sarai said: “We will see.”

The three coalition parties disagree over the right response to the structural headwinds facing Europe’s largest economy, whose car industries are dealing with labour tensions and a growing competitive threat from Chinese rivals.

Scholz’s Social Democrats and the Greens, themselves at odds on a host of issues, agree that targeted government spending is needed …