After the collapse of Olaf Scholz's coalition, elections will take place on February 23, seven months ahead of schedule.

German Chancellor Olaf Scholz lost a confidence vote in Parliament, triggering the snap election seven months ahead of schedule.

The vote on Monday came after Scholz's fragile coalition collapsed, triggering a political crisis in the European Union's biggest economy.

Scholz won the support of 207 lawmakers in the 733-seat lower house, or Bundestag, while 394 voted against him and 116 abstained. That left him well short of the majority of 367 needed to win.

The vote for a new parliament will be voted on 23 February.

The ruling coalition, consisting of three political parties, was shaken after Scholz fired his finance minister Christian Lindner in November.

Lindner's pro-business free Democrats then left the three-way coalition government, robbing Scholz of a governing majority.

Scholz's centre-left Social Democrats (SPD) and the Green Party will continue to run the country without parliamentary support until a new government is formed.

Monday's dramatic development came after months of infighting over fiscal priorities and debt spending.

Scholz, who previously served as finance minister before becoming head of a new government in 2021, accused the Free Democrats of seeking to block investment in Germany.

He framed the snap election as an opportunity for voters to chart a new course, viewing it as a choice between a future of growth versus one of austerity.

Given a second term, Scholz said he would invest heavily in Germany's creaking infrastructure, not make the spending cuts he said the conservatives wanted.

Scholz and his right-wing challenger Friedrich Merz, who opinion polls say is likely to replace him, clashed in a debate before the vote, accusing each other of incompetence.

"Short-sightedness may save money in the short term, but the mortgage on our future is unaffordable," Scholz told lawmakers.

Merz told Scholz that his spending plans would burden future generations, and accused the chancellor of failing to deliver on rearmament promises after Russia's invasion of Ukraine.

The conservatives have a comfortable, albeit narrowing lead of more than 10 points over the SPD in most polls.

The far-right Alternative for Germany (AfD) is slightly ahead of Scholz's party, while the Greens are in fourth place.

The mainstream parties have refused to govern with the AfD, but its presence complicates parliamentary politics, making difficult three-way coalitions like Scholz's more likely.

Meanwhile, the chancellor set out a list of urgent measures he could adopt before the election, including 11 billion euros in tax cuts and an increase in child benefits.