Like its election, Germany's coalition talks will be dominated by domestic issues

Coalition, coalition, coalition – this is all par for the course in German politics. It’s been almost a month since the BTW13, and the new government has yet to be formed. This is no cause for alarm, of course, Germans like their coalitions, and they understand that they take time to form.

With the Greens now out of talks, Angela Merkel’s CDU/CSU has to try and form a Grand Coalition with the SPD (the most popular choice for government among the public.) The parties  held third-round talks in Berlin yesterday, finally agreeing to enter formal Grand Coalition negotiations. Talks will start next week, subject to approval by an SPD party convention on Sunday.

Merkel's priorities are clear. On Wednesday she laid out her agenda for government as she starts her third-term as Chancellor. They are: ending the eurozone crisis; cutting the costs of Germany’s energiewende (or its move from nuclear to renewable power); dealing with the problem of its ageing population and federal reform of the states.

Although the eurozone crisis is Merkel’s top priority, as we have been arguing for quite some time now, regardless of coalition outcome, the German approach to the eurozone will not change significantly: expect more of the same. The SPD influence may cause some change in style, but not substance. It is unlikely that eurozone policy will feature as the key headline during coalition negotiations.

From a domestic perspective, the focus on demographic challenges is interesting. As we have noted, this is a huge deal for Germany, with its population set to shrink significantly over the coming decades and the pension burden set to jump accordingly. How this is dealt with will play a role in determining for how long Germany retains its current status as the powerhouse of Europe. This is a question that will worry SPD and CDU alike.

Equally important, will be the cost of  Germany's energiewende. A recent report by the FT estimates that that German consumers will have spent over €100bn on subsiding green energy by 2014. The pressure to reform Germany's renewable energy law to lower costs will run across party lines.

Given this, the domestic issues that are bound to dominate coalition talks will be the question of introducing a minimum wage, taxation and spending. Here, the SPD will fight hard for a 'victory'. The party knows that it lost a lot of support the last time it entered into a Grand Coalition with a significantly more powerful CDU/CSU in 2005. And this time around, Merkel’s party is even stronger (it is just a few seats shy of an absolute majority in the Bundestag). Not surprising, that reports emerging from Germany say that the SPD is fighting hard to win the Finance and Labour Ministries over the less-influential Foreign Ministry, (although, this was denied by SPD general secretary Andrea Nahles this morning.)

Although it is unlikely that the CDU/CSU will hand over the Finance Ministry, it will be willing to compromise elsewhere, giving the SPD the 'prize' it is looking for. This could be a compromise on mimumum wage. But it is important to distinguish here (and this is a detail that has not been grasped by some English reports on this issue), that BOTH the CDU/CSU and the SPD are in favour of a minimum wage.The question, then, is what the rate and scope of the wage should be. The SPD favour a statutory (national) minimum wage of €8.50/hr, while the CDU/CSU wants to allow trade unions and employers to negotiate the level individually in each German Bundesland, or state.

As already indicated by CDU-leader Horst Seehofer, he would be inclined to accept the SPD's €8.50 demand under ‘certain conditions’. The caveat being that the SPD demand is OK if it doesn’t cost jobs - given that Germany is already facing some labour shortages this is plausible. Presumably, however, this means that the SPD will have make concessions on other domestic fronts – such as agreeing not to raise taxes further (one of the SPD’s key campaigning platforms) and no further creation of debt. (Like the CDU/CSU, the SPD believes in cleaning-up budgets, but it favours a less-strict austerity schedule.)

So, while the SPD is likely to win the domestic victory it is looking for – it  will not be a huge blow to Merkel’s CDU/CSU, which will be sure to win concessions elsewhere.Compromise in coalition are all part of the course in German politics.

From a wider European angle, however, the coalition talks will be broadly reminiscent of the campaign: domestic issues will supersede.

What's happening in Germany? An update on the coalition negotiations

Which way will Angela Merkel choose?

A quick update on the German coalition government negotiations.

There has been a lot of posturing over the past couple of weeks from all sides about the willingness to do a deal and what is needed to secure one. So far though, things have basically followed our expected timeline with end of November still looking to be the likely date for a final agreement.

A grand coalition still remains the most likely outcome but a CDU/CSU and Green coalition (Black-Green) has increased in likelihood. Below we lay out the key developments in each party’s position:

CDU/CSU:

• Despite being the runaway winner of last month's elections, it has taken a relatively back seat in the recent public discussions (behind closed doors it is obviously leading things).
• Has kept the door open to formal talks with both the SPD and Greens, ensuring that the former knows it has a “serious alternative”. That said, some within the party have expressed unease about a Black-Green coalition, with CSU Chief Horst Seehofer notably saying he “would not hold talks” with them.

SPD:

• Has begun to lay out its terms for joining a coalition, focusing on higher taxes on higher incomes and a national minimum wage. Has also made overtures about renewing its push for a financial transaction tax of some form, possibly linking this to the proposed eurozone bank resolution fund.
• The spokesman of SPD’s conservative wing, Johannes Kahrs, told Die Welt it is “non-negotiable” that “the SPD appoints the Finance Minister”, although speculation over this has now gone quiet and seems unlikely to happen given how keen the CDU/CSU is to hang onto this ministry.
• There is clearly some hesitancy within the SPD however, with many still scarred by the effects of the previous grand coalition in 2009. The party leadership has also promised that any coalition deal will need to be ratified by the full party membership – this adds uncertainty to the negotiations.

Greens:

• Much of the party leadership has stepped down meaning it is in somewhat of a transition phase, with senior politicians divided in terms of their eagerness to conduct negotiations with the CDU/CSU.
• The party would likely want similar agreements to the SPD on tax but also some assurances on support for renewable energy. However, given the change in leadership of the Greens and the shifts in the CDU/CSU’s energy policy, the two parties are now much closer on both of these issues.
• That said, there are plenty of areas of discord, one being immigration and asylum policy, which came to a head in the wake of the Lampedusa tragedy. Interior Minister Hans Pieter Friedrich (CSU) said earlier this week, “It cannot be the responsibility of Germany or the EU to accept all the people who are not as well of as the people here”, and went on to hit out at those immigrants who come to Germany allegedly to only access benefits. Joint leader of the Greens Katrin Göring-Eckardt hit back saying, "The rhetoric of allegedly excessive demands in view of the terrible Lampedusa catastrophe is something we cannot and will not accept”. Some have speculated that the row is in at least in part tactical, so as to provide cover in case the negotiations fail.

As for the timeline from here, the CDU/CSU will hold final informal talks with the SPD and Greens on Monday and Tuesday respectively and will decide at the end of next week who to enter into formal talks with. If it’s the SPD, as seems likely, the party leadership will seek approval from the 'small' party convention on the 20 October, after which formal talks will begin.

Meanwhile, it looks the SPD and Greens have ignored the siren calls of Die Linke to use the three parties' combined parliamentary majority to force through measures such as the minimum wage.

One final interesting point, is that these negotiations are starting to cause tremors in other countries with the Irish Independent running the front page headline this morning, “German parties battle over our corporation tax”. Clearly the lines between national and EU politics are becoming increasingly blurred in the eurozone.

What are the next steps towards forming a coalition in Germany?

As we noted in this morning’s press summary the back and forth over different coalitions and their terms has begun in Germany. So far however all comments are likely strategic and no serious movement is to be expected in the next days. SPD chairman Sigmar Gabriel already stressed that the process will take "weeks and months".   

There are four key stages which have to take place in the negotiations and the likely timeline for them to be concluded is at least two months. It could well be longer if any of them is delayed since there is no official time limit.

Four stages

(1) ‘Sondierung’ (Informal talks between parties to establish whether there is enough consensus to start official coalition negotiations)
(2) Coalition negotiations
(3) Sign coalition contract
(4) Vote for Chancellor and launch of government

Preliminary schedule

27 September
SPD ‘small’ party convention (comprising SPD leadership + 200 members)
→ will decide whether party leadership gets green light to begin informal talks with CDU/CSU over a Grand coalition (Stage 1)

Early to Mid-October
‘Small’ party convention will reconvene
→ If the informal talks prove productive (stage 1) the party leadership will ask the small convention to give approval for the beginning of official negotiations (stage 2)
→ might defer this decision to the ‘big’ party conference (this would delay the schedule and could mean stage 2 does not begin until mid-November)

14-16 November
SPD ‘big’ party conference
→ If stage 1 & 2 successful, will decide whether coalition agreement will be adopted and thus give way to stage 3
→ Will also provide opportunity to decide issues such as party leadership positions & future ministerial positions

25 November
Bundestag will reconvene
→ Vote for next Chancellor and formal launch of new government

Clearly then, the minimum time for a Grand coalition to be formed and finalised is likely to be around two months. This could of course be different for a coalition with the Greens, although we would imagine not markedly so.

German Elections: The European Reaction

Mixed Reaction in the Med

Spanish daily El Mundo runs with the headline “Merkel, Merkel über alles”, while an article in the paper argues that a Grand Coalition (composed of Merkel's CDU/CSU and the centre-left SPD) “would lead, to a certain extent, to a relaxation of the austerity Merkel imposes on Europe.”

Meanwhile, Spanish Foreign Minister José-Manuel García Margallo went even further with his hopes that new German government would relax the pace of austerity in the eurozone's Southern periphery, telling Cinco Dias that “Eurobonds will come.”  (We disagree with this assessment, read our German election briefing to find out why.)

An editorial in El Pais suggests that the result “validates [Merkel’s] European theses”. Les Echos agrees, arguing that it is “illusory” to expect a Grand Coalition to “fundamentally” shift Berlin’s approach to the eurozone.

In France Les Dernieres Nouvelles D'Alsace argues that the election outcome is "unlucky for France, whose voice does not count anymore, and will only be heard again when the French economy improves". Meanwhile, Le Figaro splashes a beaming Merkel on its front page with the headline, "The Triumph of Merkel," pointing out that a victory like this has not been seen in over half a century.

From Greece - less congratulatory tones. An article in Greek daily Ta Nea carries the headline, “Europe becomes Merkeland after the triumph of the Queen of austerity.”

 Northern Europe congratulates victorious Merkel - but warns of the challenges ahead

A leader in Dutch daily Trouw argues that Merkel was re-elected because of the German public's "reluctance to engage in big adventures." However, it adds that "for Europe, Merkel's victory is good news...Merkel believes in political and monetary entrenchment of her country in Europe - and without Germany the euro is a lost project."

Meanwhile, De Volkskrant quotes an unnamed EU ambassador of a eurozone country saying that the member states are "27 poodles on the leash of Angela Merkel". The newspaper adds: "the Empress herself stresses that she is in favour of a European Germany, and that is undoubtedly true". The paper goes on to criticise Dutch PM Mark Rutte, saying, "Mark wants what empress Angela wants. The German voter has on Sunday decided the European agenda of Mark Rutte".

Belgian centre-left daily Le Soir  takes a consiliatory tone, arguing: "Certainly the Greeks don't like [Merkel]. But what would Greece and the euro today be if she hadn't insisted that the Greeks must tighten the belt before receiving European funds? Who else in the European Council would have managed to keep heads cool when having to listen to the cries on the streets of "Merkel, Hitler"?"

Meanwhile, Politiken from Copenhagen congratulates Merkel, while urging her to take action, saying,“The key is that the German government creates stability and firmly stands behind its support of EU and the euro... It is necessary that the new German government puts itself at the forefront of a European recovery"

Austria's Der Standard reports on Merkel's "middle-direction, mediocrity, " which "gives the Germans soundness and stability." Separately, a piece in the Telegraph argues Merkel's re-election should not lull the Germans into complacency, which could prevent it from making the necessary reforms to fix the underlying structural weaknesses in its economy.

Central Europe: Move forward the debate

Lidové Noviny from Prague takes a more critical view of Merkel's re-election, saying that she has "brought no solutions, and the eurozone remains a risk for the lasting prosperity of Europe." The paper writes that, "It is indeed sad that the euro-sceptic party Alternative für Deutschland has narrowly failed to reach the Bundestag. This would have opened the political debate in Germany. But next year will see elections for the European Parliament and then the AfD could get a breakthrough."

Polish daily Rzeczpospolita says that "a miracle is expected from Merkel: reform the EU to make it attractive for future generations. The new government has to show that it is possible in crisis-torn Europe to combine sound economic policies with growth incentives. The young generation needs a signal that it is not eternally damned to live worse than their fathers and grandfathers."

Varied reactions then as expected. However, there does seem to be a consensus that, for better or worse, Merkel will continue to set the tone and agenda for Europe for some time to come.

As focus shifts to German coalition negotiations, who are the key players to watch?

After a surprisingly manic election night the focus in Germany now shifts to the tricky task of forming a government. As we noted yesterday, many options remain possible. Merkel looks unlikely to gain a majority on her own while the FDP and AfD are certainly out of the Bundestag.

This leaves a Grand Coalition, a CDU/CSU and Greens coalition or (as a very, very longshot) some form of SPD-Greens-Die Linke (Red-Red-Green) coalition or alliance which could still mathematically have a majority.

Little progress is expected before the end of the week, with the SPD holding a small party conference on Friday where it will determine its strategy for the negotiations. SPD Chancellor Candidate Peer Steinbrück has already said that the “ball is now in Merkel’s court”, suggesting he expects her to propose the terms of any Grand Coalition. Meanwhile, Greens leader Jürgen Trittin has said that, while open to negotiations over a coalition with Merkel, the chances of finding an agreement are “extremely limited”.

Who are the key players in the formation of the new government?

Angela Merkel (Chancellor – CDU/CSU): As Chancellor in her third term, Merkel will remain the key power player. Her slow and incremental approach will continue and set the tone for the whole government. Her term will be dominated by questions over her successor – for which there are few candidates. Rumours already abound that she may leave before the end of her term. She will need to identify and groom a successor, however, whether this will erode her own power base remains to be seen. Remains a key ally for Cameron and the key person he needs to convince for his reform agenda.

Wolfgang Schäuble (Finance Minister – CDU/CSU): Likely to remain Finance Minister, strong supporter of Merkel’s incremental approach to the eurozone crisis.

Peer Steinbrück (SPD Chancellor Candidate): Likely to lead the coalition negotiations for the SPD (although this could still change), but won’t take up any ministerial post in a grand coalition. Could well pay the price for the party’s poor electoral showing. 

Sigmar Gabriel (SPD Chairman): Likely to be Vice-Chancellor and take up ministerial post (either labour or defence) under a grand coalition. However, given the bad overall score for the SPD, the existing internal pressure on Gabriel might reach a tipping-point and leave him empty-handed. 

Frank-Walter Steinmeier (Leader of the Opposition in the Bundestag – SPD): Likely to become Foreign Minister under a grand coalition as in he was in 2005 - 2009. Had a reputation for undermining some of Merkel’s foreign policy goals in the previous coalition. Often seen as a Francophile and has previously suggested he believes the UK will leave the EU. Could hamper UK reform effort, although that said, much of the power on European decisions now lies in the Kanzleramt and Finance Ministry. Furthermore, the shift from current incumbent, Guido Westerwelle, may not be huge.

Thomas Oppermann (SPD): Likely to become Interior Minister given his expertise in this field.

Greens leadership: After the Greens slipped to 8.4% (compared to 10.7% in previous elections), a lot of internal movement is going on. The party’s Chief Whip, Volcker Beck, has already announced his resignation while the double party chairmanship, Claudia Roth and Cem Özdemir, offered their resignation this morning.

Both lead candidates, Katrin Göring-Eckar and Jürgen Trittin, seem to be dedicated to stay even though internal party pressure is increasing on the latter. Finally, the leader of the Green parliamentary group, Renate Künast, would need to be considered among the key players in a potential coalition with the CDU/CSU. What ministerial posts they could or would push for is unclear, but one would assume environmental and energy related posts would be top of the list

German election exit polls suggest plenty of scenarios still in play

The first exit polls are in and it looks to be a very close run election. However, not at the top but at the bottom.

ARD: CDU/CSU 42%, SPD 26%, Greens 8%, Die Linke 8.5%, FDP 4.7%, AfD 4.9%. 

ZDF: CDU/CSU 42.5%, SPD 26.5%, Greens 8.0%, Die Linke 8.5%, FDP 4.5%, AfD 4.8%.

Both polls suggest German Chancellor Angela Merkel CDU/CSU is the clear winner. Well above expected. However the results of the others mean there is plenty of scenarios still open. Below we run through them.

Merkel gains her own majority: Unbelievably this could happen. If both AfD and the FDP miss out, with other small parties garnering around 5% of the vote but not entering the Bundestag, Merkel’s party could gain its own majority with around 42%. Currently they look to be around three seats short of this but after having been barely considered during the campaign, this is now a very real scenario.

CDU/CSU and FDP coalition continues: Despite exit polls suggesting FDP has missed out, they are so close to the threshold that they could easily still make it in. If the FDP gets in and the AfD still misses out then the current governing coalition could be maintained.

Grand Coalition: If the FDP and AfD sneak in above the 5% threshold, as is possible, then a grand coalition would likely ensue, albeit with some very complex negotiations. This could also happen if both the FDP and AfD miss out but Merkel fails to garner enough votes for her own majority.

Plenty of scenarios still possible then, even one which was barely considered. Stay tuned as we update this blog and tweet @OpenEurope throughout the evening.

Open Europe predictions for the German election

Despite presenting a ubiquitous front on our blog, our team does often have varying views on the issues we cover. As on twitter, there has been a debate going on within the office about the ins and outs of the German elections - everything from "Veggie Day" to whether the anti-euro AfD will make it into the Bundestag. And, of course, what type of coalition will be formed.

We all agree it will be a close run thing. But below we lay out each of our analysts predictions. Feel free to stick your own in the comments! (Click to enlarge)

Interestingly, it's five to four thinking the AfD will just fall short of the threshold, reflecting what we agree can be a case of AfD being underestimated in the polls. But six to three in terms of backing for a 'Grand Coalition' - which, in aggregate, must be considered a bit of a revision in favour of a grand coalition from what we laid out in our pre-election briefing. There's also one rogue analyst predicting FDP won't get in at all...

The top 10 'spiciest' moments of the German elections

How do we put this delicately...the Germans aren't exactly known for their sense of humour. Equally neither are politicians, other than attracting derisory chuckles at their attempts to seem cool or in touch with the common man. Combine the two and result is often enough to drive large swathes of people to watch the handwork of their decorator dry slowly. 

This round of German elections has been little different, not least because Angela Merkel has actively employed the tactic of trying to bore people into voting for her (see cartoon below). We haven't seen so many references to 'Safe Hands' since David Seaman's auto biography.

Fortunately, there have been a some spicier moments (though we refrain from call them "highlights"), here are the top 10:


The FDP, neo-nazis and a cream cheese discover they have something in common

An awkward moment for the FDP when someone spotted that a stock image of an all-German family used in one of their televised ads also featured in a campaign video for the far-right/neo-Nazi NPD party. Bizarrely, the same family also featured in an advert for a Finnish cream cheese. Unfortunately for the FDP, the moment has not proved as embarassing as being seen as a photocopy of the CDU.

The necklace that won the #tvduel

We all know Germans love gold but this takes the nugget. The only TV debate between Angela Merkel and Peer Steinbrück was considered so dull that it prompted many to proclaim Merkel's fetching patriotic necklace the real winner of the debate, and it quickly gained its own Twitter account with over 8,700 followers to date.

Peer's 'Stinkefinger'

After losing his only televised debate to a necklace, Peer felt the need to take drastic action. But what to do? Well, apparently, if your words aren't working, go 'wordless'. Peer Steinbrück signed up for a 'wordless interview' with Süddeutsche Magazin which ended up receiving widespread coverage in Germany and abroad after he responded to a question by unapologetically flipping the bird. Unfortunately, rather than inspiring the electorate they simply replied in kind...




Lucke's Greek toga party

If you thought Peer's wordless interview was bizarre, wait until you see this. AfD leader (and serious German professor) Bernd Lucke held an interview with German channel Tele 5 on why Greece should leave the euro, during most of which he wore a Greek flag as a toga. He then proceeded to sing a duet with the host, of the AfD's official song to the backing music of Take That's 'Back for good' (a song which Lucke had apparently never heard before). On top of all of this, as some of the papers noted, one of the producers of the show is Greek and proceeded to periodically alter Lucke's voice so that he sounded like Mickey Mouse. A truly bizarre election interview, which is well worth watching even if you don't speak German.

Don't mess with the Currywurst

While pushing for the humane treatment of animals, the Green party ironically managed to shoot themselves in the foot. In an almost inexplicable move, they proposed forcing all public canteens to make one day a week vegetarian day. Unsurprisingly, the suggestion did not go down well in a country famous for loving its meat. “How dare the Greens tell us what to eat!” thundered Germany’s mass circulation Bild newspaper, the day after the proposal was floated. What next? Banning nudism, autobahns or the Hoff...? You simply don't mess with the Currywurst or the Schweinshaxe. The Greens have recently slipped a couple of points in the polls - clearly no coincidence...

Beating the kids at their own game 

The new anti-euro party Alternative für Deutschland was widely derided as a party for old, white and grumpy men or alternatively as the 'Professor party' (if only it was true some would say). The contrast with the young, swinging and tech savvy Pirate party could hardly be greater. However, the AfD has proved it is no slouch when it comes to online campaigning with one of its election campaign videos getting over a million hits, while a Pirate video has received only just over 10,000 views.

Die Partei's whole election campaign

The brilliantly named Partei für Arbeit, Rechtsstaat, Tierschutz, Elitenförderung und basisdemokratische Initiative (Party for Work, Rule-of-Law, Protection of Animals, Advancement of Elites, and Grassroots-Democratic Initiative) - shortened to Die Partei - is a German satirical party akin to the UK's Monster Raving Loony Party, but much funnier. Set up by Martin Sonneborn, editor of the satirical Titanic magazine, its campaign pledges include razing the City of London to the ground and putting Angela Merkel on trial in a cage. Die Partei also released an election video on 'family policy' featuring (pixelated) scenes from an adult film with a soundtrack of "moaning and groaning, accompanied by light-hearted background music".

The hypnotic Chancellor 

We're not sure if it is her or her necklace, but Merkel has certainly lulled the electorate into a state of tepid contentedness. This cartoon perfectly captures the excitement of the CDU's election campaign. Merkel: "You are going to sleep. Everything is good. You are going out to vote..."





A rough ride for AfD

In their misguided attempts to stop the AfD expressing its alleged intolerant views the members of the Green youth decided to physically halt AfD activists from their right to freedom of speech and expression, with no sense of irony. Green with envy of the AfD's media coverage perhaps? In any case, as reported by Spiegel, this is likely to help the anti-euro party's chances, rather then hurt them.

Merkel drones on...

Just when the scandal surrounding the government's bungled purchase of the multi-million euro 'Euro Hawk' surveillance drone was beginning to fade, a CDU event with Angela Merkel and Defence Minister de Maizière in Dresden was interrupted by a miniature drone operated by remote control. The Pirate party claimed responsibility, saying that "The goal was to make Chancellor Merkel and Defence Minister de Maizière realise what it's like to be subjected to drone observation". Judging by the results above maybe they should just make her watch their election video...

David Hasselhof singing on the Berlin wall

Oh, sorry, that was in 1989...maybe it just seems like yesterday since we watch it on a daily basis...

How one finger livened-up the German election campaign

Peer Steinbrück, the SPD’s Chancellor Candidate graces the front cover of today’s Süddeutsche Magazine unapologetically flicking the bird.

Here's Steinbrück's picture interview in full, (quick fire questions, with 'wordless answers'):

" You’re called Mishap Peer, Problem Peer, Peerlusconi -- you’ve got no worries about being given nice nicknames?”

"Mr. Steinbrück, you and your wife have been married for 38 years. Your advice on a long and happy marriage?"

"Only 26% would vote currently for the SPD. Is that because of you?"

"The FDP leader Philipp Rösler says you don’t have capabilities to be Chancellor. Do you have a message for him?"

"Do you still wear a vest under your shirt?"

"On  scale of one-10: how good is Angela Merkel as a crisis manager? (1= terrible, 10= expert.)"

"How would you react if the Greens go into coalition with the CDU/CSU after the election due to a lack of alternatives?"

No fundamental change in eurozone policy after the German elections

Today we released an in-depth briefing on the German elections, and their implications on the eurozone. The top line: don’t expect any fundamental change in Germany’s eurozone policy after the elections.

Of the nine proposals being floated to pull the eurozone out of crisis, we expect clear movement in only one or two areas, including the most important but most unclear one: the proposal for a single eurozone resolution authority for banks.

Moreover, Germany is unlikely to depart from its emphasis on ‘sparkpolitik’ or austerity. Any change here will be largely superficial: a continuation of same policies wrapped up differently. This is based on Germany desire to ‘lead by example,’ and the broad support for austerity enjoyed among the German public.

The German insistence on structural reforms, and strong controls on taxation and spending of other eurozone states won’t change either. A government lead by Angela Merkel, could, however, push for a formalised “competitiveness pact” where by struggling eurozone countries commit to reforms  in return for aid.

The question of debt pooling will remain a contentious one  –  with the recent Open Europe/ Open Europe Berlin poll, conducted by YouGov Deutschland, showing that 64% of Germans are opposed to such a step. A debt redemption fund, as has been proposed by the influential Council of Economic Experts that advises the government, may be a possibility – however, this won’t be without opposition.

See our table below (click to enlarge) which breaks down and analyses the key eurozone policy areas on a party-by-party basis, detailing if we can expect to see movement after the elections:

Alarm für die SPD: German voters not impressed by the party's approach to the eurozone crisis

We thought we’d revive an old Open Europe tradition today – Friday afternoons = German polling time. And we certainly have some interesting news to bring you from a new ARD Deutschlandtrend poll published yesterday.

First off the parties – no huge variance here compared to other recent polls: CDU/CSU on 40%, SPD on 26%, Greens on 15%, Die Linke on 7% and FDP on 4%. Angela Merkel’s lead here looks solid, the question is will the FDP make it over the 5% threshold?

As we’ve noted before, if the FDP fails to re-enter the Bundestag, it is likely to be in significant part because of the performance of the new German anti-euro party Alternative für Deutschland which appears to have settled in recent polls on 3% (having hit a high of 5% a couple of weeks ago). Interestingly however, 37% said that it would be good if AfD won seats in parliament compared with 58% who said it would be bad; a significant pool of potential support.

The poll also has some worrying news for the SPD in particular – 70% of respondents said that the party had not really made it clear how it intended to solve the eurozone crisis or to differentiate its own policies from those of the government. This is something we’ve flagged up before – rhetoric aside, the SPD’s eurozone policy is broadly the same as that of the coalition’s. The question is, if the party is tempted to go for greater differentiation in this area, would it take a tougher stance (like it did on Cypriot banks) or a softer stance (e.g. on some form of debt-pooling or a dedicated ‘growth fund’).

The poll also confirms the SPD Chancellor candidate Peer Steinbrück's dreadful head-to-head record against Merkel - despite a small improvement in his ratings he still trails her by 28% to 59%.

Finally, 76% of respondents said they expected the euro to survive the crisis, although 29% said they want the return of the Deutschmark. 58% said that the government ought to do “everything possible” to ensure that this happens which is interestingly vague – does it mean greater EU-wide fiscal supervision or a more activist ECB? We suspect that if the latter were offered as a specific policy option it would not gain such high support.

Does the SPD really support eurobonds?

Update 1.45: It looks like Trittin has performed one of the fastest and sharpest u-turns of recent times, as he is quoted by Reuters earlier today as saying: "Merkel should stop blocking eurobonds" and suggested it could be a condition for his party's support for the fiscal treaty. This is also a matter of semantics though, as the Greens remain in favour of a limited form of fiscal burden sharing or debt mutualisation. It still illustrates the wider point however: eurobonds are in for a rough ride in Germany.

Update 1.15pm: Die Welt has published a more detailed follow-up on the issue and the Green party has followed the stance of its oft senior coalition partner and also rejected eurobonds at the present time. Green parliamentary co-chairman Jürgen Trittin said that while he agreed with the economic principles behind them, they were the wrong solution at this time, not least because it would require changing the EU Treaties. The paper states that both parties prefer an alternative, only partial, pooling of eurzone debt, possibly via a debt redemption fund.

Original post:

There's a school of thought out there - usually fairly uninformed - which has it that a German government that features the SPD (social democrats), could fairly effortlessly strike a deal with Francois Hollande over further fiscal integration, which would include, for example, eurobonds and greater ECB intervention. People arguing this point notes that SPD supports eurobonds, while doing fairly well in opinion polls. That should cut it right?

Well, this view tends to underestimate the German cross-border consensus on sound money and budget discipline. And from today's Die Welt we learn that the SPD has retreated from its previous support for Eurobonds, thereby distancing themselves from their French counterparts. Thomas Oppermann, the party’s speaker in the Bundestag said:

"We oppose the uncontrolled pooling of debt… There is absolutely no need for general eurobonds". 

Oppermann added that:

“I speak for [Germany] and not for France”.

And there you have it from the horse's mouth...this will be a long, unpredictable debate in Germany.

Will Merkel's fiscal treaty become a hostage of the FTT?

As we reported in yesterday's press summary, given that the recently signed 'fiscal treaty' will impact on the budgetary autonomy of the Bundestag, it will have to be ratified in both houses of the German Parliament by a two-thirds majority.

Here are some basic Bundestag mathematics: out of a total of 622 MPs, Merkel's coalition has 331 (195 from CDU + 43 from CSU + 93 from the FDP), far from the 415 MPs necessary for the two-thirds majority. So Merkel will definitely need to have some of the SPD's 146 MPs on side, and would also like to be able to count on the Greens' 68 MPs just in case. The remaining opposition party, Die Linke rejects the very premise of the treaty so all its 76 MPs are highly likely to vote against.

However, the SPD and Greens have already said their consent is conditional on a number of concessions from Merkel, most notably: a 'growth programme' to balance out the budgetary discipline element of the treaty and the introduction of a financial transaction tax (FTT - its not clear if they want it in just the eurozone or the EU as a whole, although the latter looks impossible). The SPD’s leader, Sigmar Gabriel told German radio that:

"Whether we vote in favour or not depends on whether Mrs. Merkel makes substantial offers to improve the fiscal pact. I can only urge Merkel to finally take care to ensure that her government ceases to oppose the taxation of financial markets.”

This has not gone down with the FDP, who have long been opposed to a FTT unless imposed across the whole EU as minimum. The party’s General-secretary Patrick Döring described the prospect of tying the ratification of the treaty to the introduction of an FTT as “inconceivable” and “irresponsible”, while parliamentary faction leader Rainer Brüderle criticised Gabriel, arguing that:

"This is no place for ideological battles for the purpose of winning future elections. The situation demands statesman-like responsibility from all concerned."

As things stand there is a classic stand-off over the issue, with significant risks for all parties concerned:

Giving in to demands for a FTT or weakening the budgetary discipline in the treaty further, would undermine Merkel's support within her own party and threatens to split the coalition - which could trigger early elections. That said, the threat of early elections may be just enough to keep the FDP in check given their dismal recent poll results. It would also cause huge problems for Merkel in Europe given that she has expended so much political capital on pushing this treaty through.

The SPD and the Greens are far from cohesive on all issues either and getting embroiled in a full debate on this issue could expose flaws in this fledgling partnership. Furthermore, the German public seem to be losing patience with politicians inability to tackle the eurozone crisis - further posturing on the issue for political gain could easily backfire.

In the end then consideration of these risks and the trend for orderly consensual politics in Germany means that the approval of treaty still looks highly likely, posturing aside. Nonetheless it looks as if Merkel will have to offer the opposition some concessions (e.g. the FDP have indicated they could stomach a watered-down FTT along the lines of the UK’s stamp duty). The extent of these could have a big impact on the power base of the current government and the outcome of the next election.

The vote itself is not scheduled until the 25th May, so there is 'plenty' of time for the party leaderships to hammer out a deal between themselves and present it to their MPs to be rubber-stamped...