Merkel Backs Coalition With German SPD as Hard Bargaining Looms

Chancellor Angela Merkel urged Germany’s opposition Social Democrats to get serious about signing on as the junior partner in her third-term government, saying the time to dwell on policy differences is over.

“I found it pointless” in previous talks with the SPD and the Greens party “to list all the issues that divide us,” Merkel said in Hanover yesterday in her first speech since winning German elections on Sept. 22. “It’s much more fruitful in my view to talk about how we carry out the mandate from voters. That’s what guides me in the talks on the formation of the next government, the formation of a grand coalition” with the SPD.

Bargaining was already under way as negotiators from Merkel’s Christian Democratic bloc and the SPD prepared for a third round of preliminary talks due to begin at 3 p.m. in Berlin today. A leader in Merkel’s bloc, Bavarian Prime Minister Horst Seehofer, broke ranks and said he was ready to take up the SPD’s demand for a minimum wage, which Merkel rejected during her campaign.

The concession on one of the SPD’s totemic policy issues would allow the Social Democratic leadership to show its members that it’s fighting hard to secure its campaign platform. A mini SPD party congress is due to meet in Berlin on Oct. 20 to give the go-ahead or reject formal negotiations on a possible coalition with Merkel to govern Europe’s biggest economy.

Greens Exit

The chancellor was left with the SPD as the sole negotiating partner after her bloc and the Greens were unable to bridge their differences on tax increases to pay for infrastructure, a Green demand that Merkel rejected as “poison” for the economy during her campaign.

Minimum wages and taxes are among the disputes heading into today’s talks. Merkel regards her commitment not to increase taxes as one of two red lines in talks with the SPD, which wants to raise the top income-tax rate to 49 percent from as low as 42 percent. The other taboo is a rejection of joint euro-area bonds, with all other topics, including minimum wages, open to negotiation, according to a person familiar with her strategy.

As the SPD sticks to its demand for a nationwide statutory minimum wage of 8.50 euros ($11.50) per hour, Merkel favors an industry-by-industry approach through collective bargaining.

Joining a Merkel government “makes no sense” unless that coalition backs the SPD’s minimum wage concept and better pay conditions for temporary workers, Thomas Oppermann, the party’s parliamentary whip, said at a separate event in Hanover yesterday.

Bavarian Concession

Merkel’s bloc may be ready to deal. Seehofer, who heads the Bavaria-based Christian Social Union allied with Merkel, said he could envisage a minimum wage if the SPD dropped its demand for higher income taxes, the Munich-based Sueddeutsche Zeitung newspaper cited him as saying in an interview to be published in today’s edition.

Merkel, speaking at a labor meeting in Hanover, didn’t tip her hand on wage policy. “We will have to have more talks with the Social Democrats to see how we do this,” she said. “The one thing we have to make sure is that we don’t destroy jobs.”

Heading a so-called grand coalition of the two biggest parties would be familiar for Merkel, who governed with the Social Democrats in her first term between 2005 and 2009. With the SPD-led opposition controlling the upper house, it would also help avoid legislative gridlock.

Bundestag Muscle

Merkel, 59, heads into coalition talks backed by the biggest election victory since German reunification in 1990. The result cemented her status as Europe’s pre-eminent leader, though she fell short of the absolute majority of seats in the lower house, or Bundestag, needed to govern alone. The Bundestag is due to convene on Oct. 22 for its first session since the election.

Merkel’s Christian Democratic Union and the CSU will send a combined 311 members to the 631-seat Bundestag, with the SPD taking 193 seats. In 2005, when Merkel saw off SPD Chancellor Gerhard Schroeder by a single percentage point and was forced into a grand coalition with his party, she took 226 seats to the SPD’s 222 seats.

Outlining her third-term plans in yesterday’s speech, Merkel pledged to work for a stable euro area and push ahead with Germany’s shift to renewable energy. Tackling demographic change and financial relations between Germany’s 16 states and the federal government are the other two priorities, she said.

“I want a stable euro area,” Merkel told the meeting of the IGBCE union, sticking to her line that her aim is to boost competitiveness across the 17-nation euro area. “Europe should emerge strengthened from the crisis.”

The SPD has said it will put any coalition deal agreed with Merkel’s bloc to a ballot of its entire membership. That vote could take place around the time of the SPD’s convention, due to take place in Leipzig in mid-November.

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