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Friday, October 11, 2013

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:

  • 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.
  • 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.
  • 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.


Rik said...

One other point when SPD and/or Greens would 'overplay' their cards. A not unlikely scenario.
Plus CDU/CSU as a consequence would be able to dump the responsability of failing coalition negotiations with them. Also not unlikely some of the lefts hobbies look a bit moronic to be honest (and not only to me), questions how much are they attached to these pets.
New elections might also be an alternative and as a consequence of the abovementioned are a realistic possibility.
As the polls look now that would likely lead to CDU winning but also AfD getting past the 5%. Which would be an interesting scenario either way.
For spectators like ourselves but also could be for the CDU.
With polls being so unreliable the 2 most likley scenarios in case of new elections would be:
- CDU/CSU getting an outright majority; or
- CDU having an alternative on the right (which would make their negotiating position vis-a-vis the left which they are very likely to end up with anyhow much stronger.
Anyway before this plays it should be clear that the blame can be put with the Lefties. As far as the potential CDU voters is concerned. With the hardline organic soybean , tree- and nearly exttinguished hamster-huggers and similar groups is hardly relevant herefor.

Problem being that basically all are absolute disasters as negotiators so a lot is possible simply because of the mistakes all parties are likely to make.
Merkel looks by far the most competent but the people around her just put things in the media that should never end up there. She is simply not able to create a closed front. She is usually able to have the rangs closed however with not much damage done. But also as far as Merkel is concerned it simply is a risky game have CSU people around and guys like Schauble. 2 days after the elction starting to talk about tax increases and Greens not being acceptable, how stupid can you get.

Several of the Left's wishes are simply unaffordable and make no sense at all. If you would get a situation where say SPD is looked to have got the short end of the stick if the end result is not close to the middle of the 2 starting positions. While the CDU electorate/backers who started with much more realistic hobbies as a government party ends up with a bad deal from that perspective.
In a nutshell at the end a situation that both parties look awful and as the Dutch case shows with potential existential problems from the start. Say when the CDU would allow tax increases. Hard to see that they longer term would get away with that. Just ask 'Read My Lips' Bush especially as it would partially destroy the image of a sound and successful economic policy in prior CDU years as well.
Basically what you have seen in Holland. You simply have built in tensions that will cause problems along the way and a lot of them.

Rik said...

The problem with the pro-Euro folks are they are basically forced in the defence and simply donot know how to handle that.

Bit like Mr Ed and the referendum. A battle that you are not going to escape. But iso preparing for it do the ostrich thing.

Problem being not only have they not fully realised that this is a new era. One with sceptial voters and the EU religion having become as popular as the Islam in the West with large groups in those societies.
Even the few people that want to make the case simply havenot come up with a very convincing one.
It is simply hard to sell more Europe needed to make the present dysfunctional stuff (like the EURO) work while people see only earlier measures fail, incompetent and/or dodgy representatives, and high costs. In business terms hard to increase your turnover and profit margin when you just have poisoned a few people or several drove into trees by themselves at 60 miles an hour. It is simply damage limitationtime.
With as said the Catch22 that more will be needed to make it work.

Clear from all angles. The EU decisionmakers are scared like hell even about getting votes in their own parliament about more Europe. Not even to mention bring it to the voter. All kind of completely legal dodgy stuff just to avoid a treaty change as the approval would be very difficult.

But as said it is a battle that they will almost certain not be able to escape. Do nothing and the UK will run into a referendum of which the outcome is an out and there is your gamechanger. And this is only one of the many possible.

Anyway seen the fact that like in the UK where polls indicate say a 60-40 on exit (under the current terms), but 80-20 if there should be a referendum. And this is something you see roughly al over the place on these and similar issues. Look at Catalunya indepence for instance. The lack of democracy around it is even a bigger problem than the measure itself.
So the longer the pro-EU folks run away for the discussion the worse the situation is likely to get.

And as said they simply donot have a clue how to make the case and by whom. A few days ago we had the Verhoffstat (whatever it is called) thing. The guy probably would have worked better as Victoria Secret face (well more other parts of the anatomy, well not in his case of course).
This is not a guy who you would like to convince the sceptics (which is simply necessary) with.

Nathanael said...

The SPD are not thinking this through. Any coalition with the CDU -- which is likely to crash and burn spectacularly in coming years -- will simply put the SPD in the same position as the Liberal Democrats are in the UK, namely dead.

The Greens could survive a CDU coalition if they split the ministries so that they had a single-minded focus on environmental issues.

The best choice for both the SPD and the Greens, politically, is a coalition with The Left for the purpose of fixing the economic problems, but apparently there are too many personal issues involved.

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