Merkel’s Cold Embrace Leaves SPD Wary of Coalition Talks

At the end of Angela Merkel’s first term, her Social Democratic coalition partner recorded its worst election result since World War II.

The phenomenon was repeated two days ago when the Free Democrats, the German chancellor’s second-term ally, were bounced out of parliament for the first time since 1949.

The SPD, the second-place finishers in the Sept. 22 vote, may be reluctant to try again, picking up what its chairman suggested yesterday was a poisoned chalice.

“The SPD won’t stand in line or make an application after Merkel ruined her current coalition partner,” Sigmar Gabriel told reporters yesterday in Berlin.

His party’s wariness of Merkel’s embrace illustrates the SPD’s dilemma as she reaches out for a third-term partner: join her government and risk being smothered, or play hard to get and risk spending another four years in opposition.

Many SPD members oppose being the junior partner in a government of the two biggest parties, known as a grand coalition, which would force the Social Democrats to bargain for policy influence with a resurgent Merkel.

“Not many in the SPD feel the urge for a repeat,” Frank-Walter Steinmeier, the party’s leader in parliament, said as results came in on Election Day. The same tally showed the FDP dropping out after Merkel urged her supporters to refrain from sympathy votes for the Free Democrats, whose tax-cutting agenda she quashed as she focused on debt reduction.

Talks between the two main factions could take some time. In 2005, it took 65 days to swear in their grand coalition, a record in post-reunification Germany.

Reaching Out

Coalition jockeying began yesterday as Merkel approached Gabriel on the morning after she won the highest share of votes in a national election since Helmut Kohl in 1990. Gabriel said he didn’t take Merkel’s first call at 9 a.m. They spoke at 11 a.m., he said, without specifying who called whom.

Merkel also didn’t rule out talks between her Christian Democrats and the Greens, the fourth-biggest party. All three groups say they’ll shun the anti-capitalist Left, the third-strongest party.

The SPD has scheduled a meeting of 200 party members on Sept. 27 to decide how coalition talks should proceed. Merkel, who pledged yesterday to form a “stable government,” said she’ll await the outcome.

While Merkel claimed a mandate to lead Europe’s biggest economy for another four years, she fell short of the majority needed to govern alone. The SPD says it’s up to her to make the first move.

‘Tactical Positioning’

Gabriel hinted that his party may use its leverage to engage in extended bargaining, saying “the coming weeks and perhaps months can’t be influenced by tactical positioning, but rather that we have to have a clear view with respect to substance.” .

Any deal with Merkel would probably involve compromises on income tax, health care, minimum wages and possibly on bailout policy for indebted euro-area countries. Merkel and SPD leaders declined to discuss possible scenarios yesterday, saying it was too early to tell.

Gabriel and Peer Steinbrueck, the SPD’s chancellor candidate, said during the campaign that their only objective was to govern with the Greens. Merkel said “no one wants” a grand coalition.

They may have no other choice. Polls suggest that the biggest number of voters prefer a tie-up of Merkel, Germany’s most popular politician, and the opposition party that lambasted her as lacking vision.

New elections are “very unlikely,” making the grand coalition “the only realistically possible combination,” Carsten Brzeski, chief economist at ING-DiBa bank in Frankfurt, said in a note.

First Coalition

The first grand coalition, in which Steinbrueck served as Merkel’s finance minister, resulted from an inconclusive vote. Merkel won the most votes and took over after former Chancellor Gerhard Schroeder surrendered his claim to the job.

Together, they undertook overhauls such as raising the retirement age to 67 from 65, alienating the SPD’s base. Merkel, backed by the SPD, also raised the value-added tax.

In fact, the Social Democrats and Greens backed Merkel on most bailout votes in the German parliament during her second term, saying their pro-European stances overrode party politics. Allying with the Social Democrats would also help Merkel find third-term majorities in the upper house, which the opposition controls.

“Negotiations now will be arduous and could possibly be drawn out until November,” Standard & Poor’s said in a research note. “The most controversial subjects of the coalition negotiations are likely to be around taxation and labor market politics, but not crisis management in the eurozone.”

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