In the election of 1998, Kohl's coalition was defeated after 16 years in power. Gerhard Schroder, the leader of the Social Democratic Party, became Germany's chancellor. He formed a new coalition, consisting of the Social Democratic and Green parties. The election marked the first time since 1945 that a government had been voted out of office. It also marked the first time that one of the preceding coalition partners did not remain in the new coalition.

In 1999, Germany and most other members of the European Union formally adopted a common currency called the euro. These countries agreed that euro coins and notes would go into circulation at the beginning of 2002 and their own currencies would be phased out by mid-2002.