After sacking Finance Minister Christian Lindner of the Free Democrats (FDP) party, Scholz is expected to head a minority government with his Social Democrats and the Greens, the second-largest party.
WHAT HAPPENS NOW?
Scholz said he would call a confidence motion in his government for Jan. 15, the necessary precursor to holding an election by the end of March.
Under rules created to prevent the kind of coalition chaos that hastened the end of Germany's interwar democracy, the chancellor largely controls the pace of events: the opposition can only push him out earlier if they can find a majority for a specific alternative chancellor, which would be challenging with current parliamentary arithmetic.
HOW WOULD SCHOLZ GOVERN UNTIL THE ELECTIONS?
The Greens, the second-largest party in the original three-way coalition, will stay in government. With no parliamentary majority of their own, they will need to cobble together ad hoc support for individual votes from other parties.
Scholz said he would ask Friedrich Merz, leader of the opposition conservatives, to support urgently-needed budgetary measures, saying Germany's crisis-stricken economy could not wait until after the elections for government action.
The four FDP ministers in the government - besides Lindner, the ministers of justice, transport and education - do not necessarily need to be replaced. The post of finance minister is named in the constitution, meaning Scholz must make an appointment.
Possibilities include his close adviser Wolfgang Schmidt, the minister in charge of Scholz's office, or Robert Habeck, who could assume the job alongside his current posts of Economy Minister and Vice-Chancellor. Scholz, himself a former finance minister, could also take on the post alongside his chancellorship.
WHAT CAN THE OPPOSITION DO?
Merz, who has long demanded early elections to replace a government he says has lost the ability to act, would then face a dilemma: refusing to help Scholz put together a budget could harm causes Merz backs strongly, such as supporting Ukraine.
Conversely, Merz, with a strong lead over all the coalition parties in the polls, might be reluctant to hand Scholz a win shortly before an election.
Merz plans to make a statement at 0845 local time (0745 GMT) on Thursday.
