New Deadlock, Old Solution?

By: Katarzyna Mirecka, Economist at CASE

It has been more than two months since German Chancellor Angela Merkel began her struggle to form a coalition government in the wake of an election where her CDU (Christian Democratic Union of Germany) and its sister CSU (Christian Social Union in Bavaria) received 32% of the votes. Negotiations between the CDU-CSU, Green Party, and the FDP (Free Democratic Party), which were supposed to end in the so-called “Jamaica” coalition, collapsed on the night of November 19th/20th. The FDP, sensing that they were to be the losers in such a coalition, pulled out, with FDP leader Christian Lindner bluntly stating that he believed it was better “not to rule than to rule badly.”

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Source: Reuters

The reason for the proposed coalition not meeting its fourth self-imposed deadline was, according to Lindner, lack of “common vision for modernisation of the country or common basis of trust,” with the main bone of contention being migration and climate policy. After Ms. Merkel’s decision to open German borders to 1.2 million migrants and refugees in 2015–2016, there still remains the question of how many should be allowed to be joined by their families. Perhaps more importantly, Ms. Merkel’s highly controversial decision has opened the door for debate on how many migrants and refugees Germany should — and is capable of — welcoming each year. While the Greens opted for an open-door policy, while the other prospective coalition members voted for a strict number of 200,000 immigrants per year.

In respect to climate-related issues, as well, the Green party tried to pull the coalition to the left, calling for a reduction in coal-generated power, which in turn raised concerns from other partners in terms of job losses in the industry. Even though, reportedly, the Greens were ready to find a compromise and accept the limits on migration in return for more environmental regulations, it was not enough for business-friendly FDP to stay in the game, in particular given the remaining 120 points on the coalition partnership agreement yet to resolve.

While various coalition scenarios have been discussed since Merkel’s CDU/CSU won the election last September, the Jamaican option seemed (at least recently) the most viable one. With the FDP out of the game, three other options are theoretically possible: minority government, new elections, or coalition with the SPD (Social Democratic Party). The first one scenario is not very likely, since Ms. Merkel herself declared she would rather call a new election than form a minority government. According to polls, the former solution is supported by roughly half (49.9%) of Germans, although another survey showed that should that happen, the result would be very similar to the current one. Some experts fear that after the fiasco of negotiations, new elections could bring even more votes to the xenophobic Alternative for Germany (AfD), who ended up winning 12.6% of votes in September and entered real politics for the first time since its establishment.

Coalition with SPD, in turn, until quite recently seemed possible only in theory: another so-called “grand coalition” had been rejected by SPD’s leader, Martin Schulz. After 4 years in coalition with the CDU/CSU and the worst election result in the post-war history, he announced his party would move to the opposition. However, last Friday, after a meeting with the German president, Frank-Walter Steinmeier, the situation reversed. This quite uncommon move (German presidents are traditionally mostly ceremonial) led to Mr. Schulz declaring that his party is ready to negotiate with CDU/CSU. Around the same time, the Conservatives voted in favour of this solution as well. Whether a new “grand coalition” will be re-established, or will SPD provide informal political support to a minority CDU/CSU and Green Party government, remains uncertain at the moment.

Even though the SPD’s U-turn decision certainly is a good sign, Ms. Merkel and her colleagues are not raising champagne (or beer) glasses quite yet. For one, not everyone in both parties is in favor of the new coalition. Moreover, seeing Merkel in despair, the SPD may enter negotiations with exaggerated demands, which may in turn lead to another negotiations fiasco. Migration quotas could also possibly become a major point of contention again: while the SPD claims any kind of limits are unacceptable, Ms. Merkel needs to impose a cap of 200,000 in order to maintain a good relationship with the conservative CSU. Finally, even if they do manage to reach an agreement, a grand coalition would have a side effect of the far-right AfD becoming the biggest opposition party in Bundestag. Whatever the outcome of negotiations, then, it will be more and more difficult for the Chancellor to claim that the current political situation in the country is nothing but yet another challenge to overcome.

While long coalition negotiations are by no means unusual in the world of politics, for Germany the present situation represents the worst political crisis since the end of the war. Usually described using the word “stable,” Germany has had Ms. Merkel in the office for the last 12 years and she can conceivably stay for 4 years more. Political confusion, or even instability, in the biggest economy in the European Union is therefore something new. The first of the many possible consequences has already been observed in the decrease of the value of the Euro. Moreover, Merkel’s weakened position might be an obstacle to deeper economic integration in the EU and in solving key issues in Brussels. Taking a broader look at the current situation the EU faces, with Russia’s invasion in Ukraine and war in Syria, a fragile relationship with Turkey, an on-going migration crisis, and the spectre of populist movements across Europe, German political stagnation is coming at the most inopportune time.

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