(Bloomberg) — Chancellor Angela Merkel’s government was thrown into crisis after Germany’s Social Democrats redrew the country’s political map by electing a new leadership seen as a threat to the survival of her coalition.

Merkel’s SPD vice chancellor, Olaf Scholz, suffered a stinging defeat in his bid to lead the party as members voted to install Norbert Walter-Borjans and lawmaker Saskia Esken, who have been vocal in opposing the unloved alliance with Merkel. The terms of the new leadership will be determined at a three-day party conference starting Friday.

In comments after the tandem’s victory Saturday evening, Walter-Borjans said there was no intention to abruptly bolt the coalition. The SPD is more likely to put forward a set of demands, such as abandoning Merkel’s cherished balanced-budget stance and raising Germany’s minimum wage. Some may be red lines for Merkel’s Christian Democratic-led bloc.

“I never said we need to leave,” Walter-Borjans, a former finance minister of North Rhine-Westphalia state, said after the ballot’s result was announced. “We must improve the policies and perhaps loosen the black zero,” he said, referring to Merkel’s budget pledge.

Scholz, Merkel’s finance minister who along with regional politician Klara Geywitz was defeated by a margin of 53% to 45%. He pledged to support his party’s new leadership and they, in turn, said they expect him to continue in his government position.

The rebellion against the SPD establishment pushes Merkel a step closer to the exit after 14 years in power and leaves Europe’s biggest economy approaching a crossroads. Growth has faltered and populism is on the rise, while the chancellor has been overshadowed by French President Emmanuel Macron and caught between a hostile U.S. administration and an assertive China.

The decision signals a prolonged phase of political uncertainty in Germany that could hamper the European Union’s efforts to chart a path forward after Brexit and to wield its influence on the global stage.

Merkel said last year that she wouldn’t run again but intends to serve out her term ending in 2021. She’s due to meet Macron, President Donald Trump and other NATO leaders in London, followed by talks with Russia’s Vladimir Putin in Paris on ending the conflict in Ukraine. Scholz is scheduled to be in Brussels on Wednesday to broker a plan to complete the European banking union.

The Social Democrats’ leadership crisis was triggered in June when chairwoman Andrea Nahles resigned after the party’s beating in elections for the European Parliament. The succession contest reopened a party split between establishment figures and the left, which has longed to exit the coalition and re-establish the SPD’s credentials with its working-class base.

After a tumultuous year in which the SPD and Merkel’s Christian Democratic Union both faced power struggles and the economy flirted with recession, Germany’s political and business elites had hoped for a period of calm and continuity. Merkel made an unusual plea to see the alliance through to 2021, saying there was still much to be done.

But Walter-Borjans, who established a reputation for fighting tax cheats, and Esken, who has openly called for ending the coalition, tapped the dissatisfaction of Social Democrats who blame its decline in the polls on abandoning its roots .

Breakup

Any breakup may become a drawn out process. In addition to a straight vote on leaving the coalition, there will be proposals at the SPD convention setting out conditions for staying, potentially paving the way for prolonged negotiations.

Merkel’s CDU said on Saturday that it expects the SPD to honor last year’s coalition agreement. CDU leader Annegret Kramp-Karrenbauer told delegates at its convention in Leipzig last week that she would refuse to renegotiate it.

“We want to govern Germany well, and for that we have a good basis,” CDU general secretary Paul Ziemiak said after the result. “Today’s decision hasn’t changed this basis.”

The SPD leadership also has to weigh the merits of facing a possible early election when the party has slipped below 15% in some polls, compared with the 20.5% it took in the last election in 2017. The party is running neck-and-neck with the far-right Alternative for Germany, which elected a new co-chairman at a convention on Saturday.

Tino Chrupalla, a 44-year-old tradesman from the ex-communist east — a region where support for the anti-establishment party has surged — gives the nationalists a leader from a region where the party is strong. Chrupalla enjoys support of the party’s extreme-right wing but took a moderate tone, saying the party didn’t need “drastic language” to win conservative voters who feel abandoned by Merkel’s bloc

(Updates with Scholz to stay in fifth paragraph)

To contact the reporters on this story: Birgit Jennen in Berlin at [email protected];Patrick Donahue in Berlin at [email protected]

To contact the editors responsible for this story: Ben Sills at [email protected], Andrew Davis, Tony Czuczka

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