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Germany moves one step closer to a new government

Germany moves one step closer to a new government

ANYONE hoping exploratory coalition talks between Angela Merkel’s Christian Democrats (CDU), their Christian Social Union (CSU) alliance partners and the Social Democrats (SPD) would produce an ambitious governing project was always likely to be disappointed. In the election on September 24th all three obtained their worst result since 1949. The preceding “grand coalition” had been virtually on autopilot before the election anyway and the SPD was desperate to return to opposition. It was only forced back to the negotiating table by the collapse in November of talks between the CDU/CSU, the pro-business Free Democrats (FDP) and the Greens. The leaders of all three parties—CDU, CSU and SPD—are weak within their own camps.

That showed when, this morning after a final, 24-hour-long negotiating push at the SPD’s Berlin headquarters, the parties unveiled a 28-page basis for formal coalition negotiations. There were wins for both sides of the prospective coalition. The CDU/CSU gets a monthly cap of 1,000 on new immigrants joining family members in Germany, much lower than previously mooted numbers, and an annual maximum for total arrivals in the 180,000-220,000 range. It also resists SPD demands for tax rises for the rich and for the merging of private and public health insurance into one, state-run system.

Meanwhile the SPD gets pensions guaranteed at 48% of a worker’s average salary until at least 2025, full-day schooling for all children to the age of 10 and a repealed ban on state-federal cooperation on education policy. Another achievement is increased and accelerated investment in schools, infrastructure and the digital economy. And the SPD’s influence shows in the heavy focus on a “European awakening”, which leads the paper’s list of priorities and takes up its first three pages.

The commitments on Europe go farther than what a coalition including the increasingly eurosceptic FDP would have done. A new grand coalition would support turning the European Stability Mechanism, which provides emergency financial help to stricken euro-zone economies, into a full European Monetary Fund (EMF) under parliamentary control and anchored in European law. Germany would contribute more to the EU budget. There would be corporate tax harmonisation, and funds earmarked for “economic stabilisation, social convergence and support for structural reforms in the euro zone, which could be a starting point for a future euro-zone investment budget.” In an implicit threat to central European governments opposed to refugee quotas, the document asserts that: “The principle of mutual solidarity should also apply in the EU budget.”

All of which gives Emmanuel Macron enough to tell French voters that Berlin has heard his euro-zone reform proposals and gives Martin Schulz, the SPD leader, material with which to sell a new grand coalition to his reluctant but Europhile base. But beyond the upbeat language, and uncontentious ideas like the tax harmonisation proposal, the paper’s European chapter is largely open-ended. It does not mention banking union, for example. It does not specify whether an EMF would do much more than enforce rules (as proposed by Wolfgang Schäuble, Germany’s hawkish former finance minister) or whether its parliamentary control would operate at a national or European level. The text should be read as a “simple openness to talk”, cautions Lucas Guttenberg of the Delors Institute. Much depends on whether the SPD secures the powerful finance ministry in formal talks, he says.

Meanwhile calls on Germany to do more in the world go largely unheeded. The word “NATO” is not even mentioned. Under the four-year projections of the coalition paper, notes Philipp Rotmann of the Global Public Policy Institute in Berlin, both Germany’s defence budget and its combined defence, aid and diplomacy budgets would remain broadly flat as a proportion of GDP. Climate change is not mentioned among the prospective coalition’s main priorities, and the chapter devoted to the subject effectively removes Germany’s commitment to its 2020 emissions targets—the country’s great nuclear switch-off having made it harder to close dirty coal power stations.

Domestically the paper proposes more of the same, with a few tweaks. There are yet more goodies for German pensioners, for example: alongside the 48% rate the blueprint envisions expanding the “mothers’ pension” for stay-at-home parents. On the shift to electric cars—an existentially important step for German industry in the next decades—the paper says nothing of substance. The mammoth task of integrating the country’s newcomers receives two short and platitudinous paragraphs. Observers like Marcel Fratzscher, a leading economist, and the Association of German Chambers of Commerce complain about the lack of ambition. In its reaction to the paper the latter warns of increased red tape. 

All of which is politically explainable. Mrs Merkel, facing internal criticism in the CDU, has less room for compromise than before. The CSU faces a tough election in its home state of Bavaria in the autumn. The SPD’s left, particularly the Young Socialists, its youth wing, is in revolt against any new grand coalition. There is no guarantee delegates at its conference in Bonn on January 21st will support progress to formal talks with the CDU/CSU, or that members will endorse a final deal in the (binding) ballot afterwards. The conviction that a stable government with a mediocre programme is better than a wobbly minority government, or new elections prolonging and not necessarily resolving the deadlock, is a perfectly respectable one. That Mrs Merkel has been able to forge a compromise at all, after 12 years and in difficult political circumstances for all concerned, is an achievement.

Still. At Germany’s next scheduled election, in 2021, there will be eligible voters younger than the country’s last substantive economic reform. The country enjoys a vast budget surplus (€38.4 billion in 2017, according to figures released yesterday, and rising) and record low unemployment; a window in which to prepare for the future. The wider European economy is doing well and in Emmanuel Macron Berlin has a uniquely reformist and German-friendly partner in Paris. If now is not the time to bring vision and energy to the country’s domestic modernisation and growing international responsibilities, when is? Perhaps small, tentative steps towards euro-zone reform and a “steady as she goes” agenda at home is the best that Germany’s current party politics will allow. If so, it is a shame.

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Source: The Economist Latest News

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