Merkel coalition on the line as German SPD votes to talk or walk

Chancellor Angela Merkel’s coalition plans face a make-orbreak vote this weekend as the Social Democrats decide whether to help usher in her fourth term or walk away from government and risk pushing Europe’s biggest economy further into political uncertainty. Germany’s oldest political party is split over its future direction, and those divisions will play out at a national convention on Sunday in Bonn, where delegates are set to vote on whether to move forward on another government with Merkel or go into opposition.

Investors are bracing for the outcome, with the euro forecast to drop if the SPD bows out. A “No” vote would rob Merkel of coalition options and force her to choose between a minority government or a repeat election.

Social Democratic Party head Martin Schulz, lawmakers and key labor chiefs lobbied the 600 delegates over the past week to back the leadership’s proposal to begin formal coalition talks, saying the party can achieve more if it stays in government. Kurt Beck, a former SPD chairman, said he expects the plan to pass with about 60 per cent of the vote.

“The party is very divided, like many Social Democratic parties across Europe,” Guntram Wolff, director of the Brusselsbased Bruegel research group, said in an interview, predicting a “very tight” vote. Berenberg economist Holger Schmieding said there’s a “better than even chance” of SPD backing.

On the table is a 28-page policy outline agreed by the two sides in a marathon session on January 12. SPD delegates must decide if it’s a sufficient basis on which to forge a common platform for government, even though many of them blame the party’s role as Merkel’s junior partner over the past four years for its electoral decline to a post-World War II low.