Merkel Takes Oath at Peak of Power on Return to EU Stage

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Photographer: Sean Gallup/Getty Images

German Chancellor Angela Merkel speaks with members of her new government during a vote at the Bundestag in Berlin, on Dec. 17, 2013.

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Photographer: Sean Gallup/Getty Images

German Chancellor Angela Merkel speaks with members of her new government during a vote at the Bundestag in Berlin, on Dec. 17, 2013. Close

German Chancellor Angela Merkel speaks with members of her new government during a vote at the Bundestag in Berlin, on Dec. 17, 2013.

Photographer: Krisztian Bocsi/Bloomberg

Germany's Chancellor Angela Merkel is applauded by her coalition government after taking her third term oath in the Reichstag in Berlin. Close

Germany's Chancellor Angela Merkel is applauded by her coalition government after taking her third term oath in the... Read More

Photographer: Krisztian Bocsi/Bloomberg

Germany's Chancellor Angela Merkel, left, takes her third term oath beside Bundestag President Norbert Lammert, as the new coalition Government is sworn in at the Reichstag in Berlin. Close

Germany's Chancellor Angela Merkel, left, takes her third term oath beside Bundestag President Norbert Lammert, as... Read More

Photographer: Krisztian Bocsi/Bloomberg

Defense Minister Ursula von der Leyen, center, gestures as she sits beside Finance Minister Wolfgang Schaeuble, right, as the new coalition government is sworn in at the Reichstag in Berlin. Close

Defense Minister Ursula von der Leyen, center, gestures as she sits beside Finance Minister Wolfgang Schaeuble,... Read More

Chancellor Angela Merkel locked in her dominance of Germany as she took charge of a third term that allows her to again press her agenda for Europe.

After cajoling the defeated Social Democratic Party to become her junior coalition partner, Merkel was sworn in today under the glass dome of the Reichstag building in Berlin, two days before European Union leaders meet in Brussels to hammer out measures to strengthen banks.

Merkel, 59, returns to the international stage at the peak of her power after crafting a coalition of the two biggest parties that reflects her agenda for Europe and co-opts the Social Democrats on domestic matters. She plans to address lawmakers on European policy tomorrow before traveling to Paris for pre-summit talks with French President Francois Hollande.

“She has again totally monopolized the center” of German politics, Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington, said by phone. Merkel is Germany’s most popular politician and the SPD “really has no policy platform anymore to attack her.”

Almost three months of bartering on policies and personnel culminated yesterday with the signing of a four-year coalition platform that leaves Merkel’s Christian Democratic Union in control of key ministries and Finance Minister Wolfgang Schaeuble, her point man during the debt crisis, at her side.

‘Clear Conditions’

Schaeuble lost no time in summoning his euro-area counterparts to Berlin last night to discuss plans for handling bank failures, holding to Germany’s stance on maximum shielding of taxpayers.

“We’ve been talking about banking union for months,” Merkel said in an interview with ARD television. “We Germans have laid down very clear conditions, but I do see a chance that we can make it. I just don’t know for sure yet.”

After the SPD tapped European Central Bank Executive Board member Joerg Asmussen as deputy labor minister, Merkel’s cabinet used its first meeting today to propose Bundesbank Vice President Sabine Lautenschlaeger as Germany’s candidate to replace him.

Government lawmakers hold 504 of the 631 lower-house seats in the Bundestag, the biggest majority of Merkel’s three terms. Merkel was elected chancellor today with 462 votes to 150 votes against, with nine abstentions. She was sworn in by Bundestag President Norbert Lammert, pledging to work for “the well-being of the German people.”

Investor Confidence

SPD members backed the coalition agenda in a grass-roots vote that added legitimacy to her election victory on Sept. 22, the biggest since German reunification in 1990. That gives her near-total domestic backing as she heads to the Dec. 19-20 EU summit.

“Those who know me in Europe know that I want improved competitiveness, that I want solid finances and, most of all, a situation in which the euro is stable,” Merkel said on ARD. “Investors in the euro have to have confidence that they’ll get their money back at the end of the day. That won’t happen without growth, but growth can’t simply mean more government spending.”

Being crushed by Merkel was on SPD head Sigmar Gabriel’s mind while lobbying the party to join her government. She “isn’t the black widow waiting in her web to ensnare the SPD and gobble it up,” he said at a rally in Hamburg on Dec. 3.

‘Devour’ the SPD

Merkel “may have given something away tactically in the short run” by agreeing to SPD demands such as a national minimum wage and earlier retirement for some workers, Kirkegaard said. “She doesn’t devour the whole party, but she takes what she wants.”

Yielding on demands dear to SPD core voters allowed Merkel to blunt Social Democrat calls for higher taxes and maintain her rejection of pooling euro-area debt. In return, Gabriel signaled Merkel’s influence on European policy making yesterday, saying the coalition treaty was “good for the people of Germany and of Europe.”

Merkel, Germany’s first woman chancellor and the first from the formerly Communist east, can build on eight years as leader of Europe’s biggest economy, an austerity-first response to the debt crisis that most Germans backed and a presidential persona.

Merkel is Germany’s most popular politician with a 68 percent approval rating, according to a Dec. 2-3 Infratest poll of 1,003 people for ARD television. Schaeuble placed second with 66 percent approval.

‘Incredible Popularity’

“The way she stands above the fray, she’s unassailable,” Manfred Guellner, head of the Berlin-based Forsa polling company, said in an interview. “She fulfills Germans’ wish for consensus and harmony. That’s the foundation of her incredible popularity among voters. That’s how she’s going to run things in this new grand coalition, too.”

Merkel’s pledges on euro-area policy helped her Christian Democratic bloc win 41.5 percent of the vote to the SPD’s 25.7 percent on Sept. 22. She assured the SPD yesterday that it will get fair treatment as her junior partner for the second time after the “grand coalition” she led from 2005. In the 2009 election, the SPD vote dropped to the lowest since World War II.

The ebbing of the debt crisis since 2012 lowers Germany’s leverage over economic policy in other euro countries, meaning that Germany may “only get 70 or 75 percent” of what it wants instead of “80 or 90 percent” in the past, Kirkegaard said. “In that sense, Germany has peaked. But the descent is not very steep.”

With her coalition set-up, Merkel may be seeking to ensure that her power base is intact for another run in 2017. Victory at that point would put her in reach of Helmut Kohl’s 16 years as chancellor.

Merkel “is clinging to the portfolios that have international relevance” such as finance and defense, while handing the portfolio for Germany’s clean-energy overhaul to the Social Democrats, Joerg Forbrig, a Berlin-based European policy analyst at the German Marshall Fund of the U.S., said by phone. It’s “a very clever Merkel agenda.”

To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

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

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