Merkel to sit down with rival as coalition pact edges closer

German Chancellor Angela Merkel told her European Union partners it’s business as usual again as she returned to the international stage and the Social Democratic opposition leader opened the door to a governing coalition for the bloc’s biggest economy.

Pressure has been mounting on SPD head Martin Schulz to drop his opposition to an alliance with Merkel, after her efforts to form a government with three other parties collapsed Sunday, raising the prospect of an unprecedented repeat election and months of political drift in Europe’s biggest economy.

Schulz backed off his flat refusal to consider a renewed “grand coalition” with Merkel’s Christian Democrat-led bloc, saying that the SPD “won’t play an obstructionist role” in parliament, though he insisted party members will have the final say on any deal. It could be the first step toward rejoining Merkel as junior partner in a government, the combination that’s underpinned two of her three terms over the last 12 years.

After canceling a planned meeting Monday in Berlin with Dutch Prime Minister Mark Rutte and skipping an EU summit in Gothenburg, Sweden last week, Merkel traveled to Brussels Friday for a summit of EU leaders and partners from Eastern Europe. Next week, she heads to Ivory Coast for an EU summit with African countries.

Currently governing in a caretaker capacity, the chancellor said she had been asked by EU colleagues about the political situation in Berlin and had sought to reassure them: “I was able to tell them that we, as the acting German government, will fully fulfill our European obligations and that we will actively engage,” Merkel said in a statement to reporters, adding that her comments had been well received.

Two months after an inconclusive election that brought a far-right party into parliament, Merkel is still trying to work out how she can govern. While the chancellor is skeptical about ruling without a parliamentary majority and Schulz wants to avoid a formal coalition, the two sides are inching toward each other.

German companies are watching developments in Berlin closely but appear to be confident a favorable solution will be found. The Ifo institute’s German business confidence index climbed to a record in November.

“Most companies think that in the next weeks or months there will be a government so the economy is strong,” Ifo president Clemens Fuest said in a Bloomberg Radio interview on Friday. “Demand is strong and so far this political uncertainty doesn’t affect the economy.”

Schulz is facing calls by SPD lawmakers and state leaders to drop his refusal to join a coalition as junior partner to Merkel’s Christian Democrat-led bloc. He favors pledging SPD support for a minority government instead, something Merkel wants to avoid.

Manuela Schwesig, the SPD prime minister in the eastern state of Mecklenburg-Western Pomerania, said the party’s willingness to talk did not necessarily mean it was ready to join another “grand coalition” with Merkel, the alliance of the two biggest parties that underpinned two of the chancellor’s three terms.

“For us it’s clear that if there are talks, then we will also take part in these talks,” Schwesig said.