German SPD Sets Up Third Merkel Term, Power to Push Policy Over Opposition

Photographer: Sean Gallup/Getty Images

German Chancellor Angela Merkel’s Christian Democrat-led bloc and the SPD negotiated amid a backdrop of criticism of the country’s swelling trade surplus from the European Union, U.S. Treasury Department and International Monetary Fund. Close

German Chancellor Angela Merkel’s Christian Democrat-led bloc and the SPD negotiated... Read More

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Photographer: Sean Gallup/Getty Images

German Chancellor Angela Merkel’s Christian Democrat-led bloc and the SPD negotiated amid a backdrop of criticism of the country’s swelling trade surplus from the European Union, U.S. Treasury Department and International Monetary Fund.

Germany’s Social Democratic leader Sigmar Gabriel presented the SPD members of the next cabinet, saying they’ll face a challenge turning pledges into policy in government with Chancellor Angela Merkel.

Gabriel will head a newly configured Economy Ministry with responsibility for Germany’s energy overhaul, with the SPD also taking labor, foreign affairs, environment, justice and families. Merkel’s Christian Democrats and their CSU Bavarian allies will announce their respective ministers later today, having already secured the finance post for Wolfgang Schaeuble.

“We will move forward with implementing the coalition agreement and improve the lives of many people in the country,” Gabriel, 54, told reporters in Berlin. “It won’t be easy” to govern, he said. “Coalition negotiations are one thing, to implement them is a huge challenge.”

The 16-member cabinet takes shape as Merkel prepares to embark on her third term this week, almost three months after defeating the SPD in Sept. 22 elections. The final hurdle to her being sworn in at the head of Europe’s biggest economy was cleared yesterday as SPD members voted three-to-one in favor of entering a so-called grand coalition with Merkel’s bloc.

Merkel is scheduled to brief reporters at about 6:15 p.m. in Berlin today after a meeting of her CDU party’s executive board. The CSU, which will take the transport, agriculture and international development posts, meets in Munich at about 5 p.m.

EU Summit

Gabriel, Merkel and CSU leader Horst Seehofer will tomorrow sign the coalition accord outlining German policy for the next four years that they negotiated over five weeks and unveiled on Nov. 27. Merkel will then put herself forward for election by lower-house lawmakers on Dec. 17, with she and her cabinet due to be sworn in the same day. Merkel can then travel to a summit of European Union leaders on Dec. 19-20 strengthened at home.

With a combined 504 government lawmakers of the 631 seats in parliament’s lower house, the Bundestag, Merkel’s election as chancellor is assured. Regaining control of the upper house that she lost midway through her second term means her coalition will be able to push through policy regardless of opposition votes.

“To get such a government for her top priority -- Europe - - she has yielded a lot on domestic and economic issues” to the SPD, Holger Schmieding, chief economist at Berenberg Bank in London, said by phone. “She wants to pursue her policy of fortifying Europe against future storms and ending the current euro crisis well. To have that, a stable government with a strong majority is good for her.”

Economic Outlook

Merkel, 59, Germany’s first woman chancellor and the first from the formerly Communist east, extends her reign as Germany’s economic growth is forecast to accelerate to 1.7 percent next year from 0.5 percent in 2013, according to the government’s Oct. 23 outlook. She has pledged to balance the budget, adjusted for one-time effects and swings in the economy, next year.

Merkel has said her immediate priority is slowing the rise in electricity prices, partly a result of her 2011 decision to shutter Germany’s nuclear-power plants and switch to renewables.

Responsibility for the biggest shift to clean energy of any developed country now falls to Gabriel, the probably next vice-chancellor, who served as environment minister in Merkel’s first term grand coalition.

“We are a strong industrial nation and the energy shift will bring huge opportunities for creating jobs, but we also have to guarantee that industrial German remains reliable and expansion-oriented,” Gabriel said today. Governing “won’t be easy,” he said. “Coalition negotiations are one thing, to implement them is a huge challenge.”

Schaeuble Redux

Schaeuble, who was Merkel’s point man throughout the sovereign debt crisis that spread from Greece, is set to retain the post of finance minister, party officials said last week on condition of anonymity. In addition to the Finance Ministry, the CDU will take defense, interior affairs, education and research and health, as well as the chancellery and Merkel’s chief of staff, the party said in a statement that didn’t name ministers.

Gabriel touted concessions won from Merkel including a national minimum wage plus early retirement at 63 for some workers as he sought during the past two weeks to dispel SPD misgivings about serving as Merkel’s junior partner for a second time since 2005.

For Merkel, the coalition pact upholds her campaign pledges to reject higher taxes and pooled euro-area debt that helped her bloc to win 41.5 percent to the SPD’s 25.7 percent on Sept. 22, the most emphatic election victory since German reunification.

The fate of the grand coalition had rested with the SPD’s 475,000 members, some of whom said their party should stay out of government to build toward the next election in 2017. Announcing the result of the first ballot of party members on a coalition accord in Germany’s post-World War II history, the SPD said yesterday that about 76 percent of the 337,500 valid votes cast were in favor of allying with Merkel.

“This is a very strong mandate that the Social Democrat rank and file have given to the coalition agreement,” said Schmieding. “It makes Merkel’s government stronger in that it makes it even more likely that it can last a full term.”

To contact the reporters on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net; Arne Delfs in Berlin at adelfs@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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