German parties seek compromise
BREAKDOWN IN COALITION TALKS TRIGGER POLITICAL CRISIS AS VETERANS CALL TO MAKE USE OF THREE-WEEK WINDOW
Collapse of coalition talks has thrown country into political uncertainty and raised the prospect of new elections |
Two veteran allies of Chancellor Angela Merkel appealed to Germany’s parties yesterday to strike compromise to form a stable government that could drag Europe’s biggest economy out of a political impasse.
The collapse of talks between Merkel’s conservative bloc, the pro-business Free Democrats (FDP) and environmentalist Greens has thrown Germany into political uncertainty and raised the prospect of new elections. It has also cast some doubt over whether Merkel, Europe’s most powerful leader after 12 years in office, will serve a fourth term after her conservatives bled support to the far-right in a September 24 election, though still won the most seats.
There are wider implications too for Europe since the collapse of talks means the Eurozone’s ambitious plans for deeper economic integration could now be put on hold, Eurozone officials said in Brussels yesterday.
Merkel’s former finance minister Wolfgang Schaeuble, now in the impartial role of parliamentary president, said compromise was the order of the day while chancellery chief Peter Altmaier gave parties three weeks to sort out the mess.
“We must be in a situation in the next three weeks where there is clarity about whether there can be a stable government on the basis of this election result,” Altmaier, also acting finance minister, told ZDF television.
Merkel has said she would prefer new elections to leading an unstable minority government. Until a government is agreed, Merkel continues as acting chancellor and previous ministers remain in post.
Focus on SPD
Pressure is growing on the Social Democrats (SPD) whose leader Martin Schulz has refused to contemplate re-entering a Merkel-led government after voters punished them for sharing power with her for the last four years. Many in the SPD fear they would be committing political suicide to start another four-year term with Merkel, who is herself still popular.
Altmaier pointed the finger at the SPD, saying the conservatives stood by their responsibility to ensure Germany has a stable and reliable government.
“Like ‘Made in Germany’, we are known for having a stable and reliable government ... we must give the SPD a chance to think (about their responsibility),” said Altmaier.
Andrea Nahles, head of the SPD’s parliamentary group reiterated that it did not want to prop up Merkel again.
“We are not an emergency stop-gap for Merkel,” she said.
However, she also said the SPD would use talks with President Frank-Walter Steinmeier, who is meeting party leaders in coming days to explore possibilities to form a government, to find solutions, hinting at other possible options.
“We should talk about how we form a process that leads our country into a new, stable government,” Nahles said, adding this might be a minority government or new elections.
Steinmeier meets FDP and Greens leaders later yesterday.
One option could be an alliance between the conservatives and Greens, who built up a certain level of trust during the exploratory talks, which could be ‘tolerated’ by the SPD. That could guarantee some government policies get through parliament.
One former SPD leader Bjoern Engholm said the SPD should rethink their ‘no’ to a grand coalition, telling the Tagesspiegel the SPD should not cause instability. However, he said any such alliance would only be possible without Merkel.
While Chancellery chief Peter Altmaier has given parties three weeks to sort out the mess, Merkel has said she would prefer new elections to leading an unstable government.
he last time Germany proved unable to form a government was under the Weimar Republic. We will not see a repeat of the Thirties this time, but the failure of the “Jamaica” coalition talks is not a trivial matter either. The country faces a constitutional crisis. There is no clear-cut legal mechanism for snap elections. A fresh vote is unlikely to resolve the deadlock in any case since the fragmentation of the Bundestag may well be greater.
“It is an unprecedented situation in the history of the federal republic,” said President Frank-Walter Steinmeier. Opinion polls suggest that minor parties in various states of populist or ideological revolt — above all the hard-Right Alternative for Deutschland — will make further gains. With hindsight the election in September is taking on much greater significance: in reality it marked the end of Germany’s post-war order, the happy era of moderation and the dominance of two great incumbent volksparteien. This rupture is a direct result of the economic and political model pursued by the German elites for the last 15 years, known to critics on both the Left and Right as “hyper globalisation”.
“It is better not to govern at all than to govern badly,” said Christian Lindner, leader of the pro-market Free Democrats (FDP), after cutting off the talks. His real game is to tap into simmering discontent over immigration, calculating that Chancellor Angela Merkel’s Christian Democrats have left him an open goal.
“Germany is turning to soft nationalism,” said Ashoka Mody, a former bailout chief for the International Monetary Fund in Europe. “People on low incomes are voting against authority because the consensus on equality and justice has broken down. It is the same pattern across Europe.” Mody said the bottom half of German society had not seen any increase in real incomes in a generation.
The Hartz IV reforms in 2003 and 2004 made it easier to fire workers, leading to wage compression as companies threatened to move plants to Eastern Europe. The reforms pushed seven million people into part-time “mini-jobs” paying €450 (Dh1,938) a month. It led to corrosive “pauperisation”. This remains the case even though the economy is humming and surging exports have pushed the current account surplus to 8.5 per cent of gross domestic product. The electoral landscape is a cry of protest by those left behind. The Marxist Linke party is running at 10 per cent in the polls. AfD and the FDP are between them on 25 per cent with competing kulturkampf platforms, with the Bavarian Social Christians shifting in their direction to cover the Right flank. The economy has been firing on all cylinders this year. Growth was 0.8 per cent last quarter.
Lowering the economic speed limit
The Bundesbank says the current boom is unsustainable. It is cyclical overheating due to ultra-loose monetary policy. Behind this screen is the curse of stagnant productivity (as in Britain), lowering the future economic speed limit. Trend growth rates are heading for 0.75 per cent a year by 2021. One’s perception of the Wirtschaftswunder depends on where one sits. Marcel Fratzscher, head of the German Economic Institute, writes in Die Deutschland Illusion that Germany’s growth since 2000 has lagged East Asia, Scandinavia and the Anglo-Saxon states. It has fallen far below the country’s own past standards. “It only looks like a boom in comparison to the dire performance of the southern eurozone,” said Simon Tilford from the Centre for European Reform.
“Germany’s real weakness has been the lack of public investment. They have been running down their public sector stock even though they could borrow at negative rates,” he said. The austerity doctrine and the quest for a balanced budget above all else have left deep structural problems. The country has neglected digital infrastructure. It has the lowest ratio of high-speed broadband in the OECD [Organisation for Economic Cooperation and Development] club. The collapse of coalition talks kills off any lingering hopes of a “grand bargain” between France and Germany.
French President Emmanuel Macron will emerge by default as the de facto leader of the EU for a while as Germany grapples with its internal crisis, but this is unlikely to do him any good.
Monetary union will face the next global downturn with the old unresolved pathologies and no real buffers against an asymmetric shock, but this probably would have happened anyway with a “Jamaica” government.
There is a view that Germany is the real problem for Britain in Brexit talks since the whole structure of the single market, the euro and the European Union regulatory regime has worked so well to its advantage. Europeanist moral rhetoric is a mask for German power. The country has the greatest strategic stake in preserving the EU status quo. “They always talk about European interests when they really mean German interests,” said Gisela Stuart, head of Change Britain and herself Bavarian-born. It was Germany and France that took the toughest line before the last EU summit in October, overruling Brexit negotiator Michel Barnier when he called for compromise. “The commission is more technically pragmatic and in an odd way it may be easier to reach a deal if left to them,” she said. Stranger things have happened.
Ambrose Evans-Pritchard is international business editor of the Daily Telegraph .He has covered world politics and economics for 30 years, based in Europe, the US and Latin America.