The coalition fell apart on Wednesday when years of tensions reached their peak in a row over how to plug a multi-billion-euro hole in the budget and how to revive Europe's largest economy, which is headed for its second year of contraction.
The break-up came a day after the election of Republican Donald Trump to a second term as US president and could hamper Europe's ability to form a united response on issues ranging from possible new US trade tariffs to Russia's war in Ukraine and the future of the NATO alliance.
Scholz, of the centre-left Social Democrats (SPD), said he fired his finance minister from the fiscally conservative Free Democrats (FDP) for opposing his plan to suspend the debt brake again in order to raise more funds for Ukraine and the economy.
That led to the FDP withdrawing from the government, leaving Scholz's SPD and the Greens. The chancellor said he would hold a confidence vote in January, which he would likely lose, triggering new elections by the end of March - six months ahead of elections originally scheduled for September.
Germany's government fell apart after a row over how to plug a multi-billion-euro hole in the budget (AP PHOTO)
Friedrich Merz, leader of the opposition conservatives who are leading in nationwide polls, said this was too late and he wanted a vote of confidence immediately, "by the beginning of next week at the latest".
Elections could take place in the second half of January next year, he said.
"We simply cannot afford to have a government without a majority in Germany for several months now, followed by an election campaign for several more months and then possibly several weeks of coalition negotiations," he told reporters.
"Time is of the essence."
Merz said he would urge Scholz to speed up the confidence vote in his meeting with him scheduled for midday.
Scholz may have to heed those calls given that, due to his coalition's demise, he will have to rely on cobbled-together parliamentary majorities to pass any serious measures.
The political crisis comes at a critical juncture for Germany, with a flatlining economy, aging infrastructure and an unprepared military. But it could also be a "blessing" given the tensions that had plagued this coalition, the first of its kind at national level, said ING economist Carsten Brzeski.
"Elections and a new government could and should end the current paralysis of an entire country and offer new and clear policy guidance and certainty," he said.
Joerg Kukies, a top official in the German chancellery and deputy finance minister, has been chosen to replace Lindner as finance minister, a government spokesperson said. Kukies, from the SPD, is considered a close Scholz ally.
