German SPD Said to Want Schaeuble to Lose Euro Power

Germany’s Social Democrats want to strip euro policy making from the Finance Ministry in Chancellor Angela Merkel’s third term, according to three people familiar with the party’s negotiating strategy.

The SPD is pushing in coalition talks with Merkel’s bloc that began in Berlin today to confine the powers of the ministry currently run by Wolfgang Schaeuble to the budget and to financial ties between the federal and state governments, the people said on condition of anonymity because the deliberations are private. Responsibility for Europe, the euro and banking would be split off into another ministry, they said.

The Social Democratic approach would at once weaken the role of Schaeuble while increasing SPD leverage in the most important area of government policy outside the Chancellery. The fate of Schaeuble, Merkel’s top lieutenant and an advocate of austerity to counter Europe’s debt crisis, is one of the battlegrounds in coalition-building talks that may last until Christmas.

“I enjoy politics and right now I’m healthy again, which hasn’t always been the case,” Schaeuble, 71, said in an interview with ARD television late yesterday, declining to say whether he would remain to oversee finance. “That’s why I believe I can carry out my task well in the next few years.”

Initial Meeting

Three teams of 75 negotiators met in Berlin for less than two hours as they began the process of attempting to find sufficient common ground to form a coalition under Merkel to govern Europe’s biggest economy following Sept. 22 elections.

The policy areas to be covered in the negotiations include finances and a subordinate working group on banking regulation, Europe and the euro, according to the agenda that was agreed on by the two sides and released by Merkel’s Christian Democratic Union yesterday.

CDU spokesman Jochen Blind declined to comment when contacted by phone yesterday. SPD spokesman Tobias Duenow declined to comment on the division of working groups.

Schaeuble is leading the negotiations on the finance working group for Merkel’s bloc, with the sub-group on Europe under Herbert Reul, who heads her CDU/CSU group in the European Parliament. Across the table from Schaeuble on the main finance group is Olaf Scholz, the SPD mayor of Hamburg and a former labor minister in Merkel’s first term grand coalition.

State Concerns

The split reflects Social Democratic negotiating strategy to open up a senior finance post in Merkel’s third government, the people said.

Gaining responsibility for domestic finances would allow the SPD to overhaul funding to Germany’s 16 states, a theme the party highlighted in its election campaign and a key demand of North Rhine-Westphalia, the most populous state, run by SPD Prime Minister Hannelore Kraft. The euro-policy aspect of finances would allow the SPD more say in European negotiations to push its agenda of doing more to spur economic growth and counter unemployment.

“Our goal is to bring these talks to a successful conclusion,” Andrea Nahles, SPD general secretary, told reporters in Berlin after the talks ended. “There is much to do and we’ll now get to work.”

Merkel’s second term ended yesterday, four weeks after the election, as the lower house of parliament, or Bundestag, convened without a new government. German President Joachim Gauck gave Merkel permission to lead a caretaker administration until the next cabinet is sworn in.

Members’ Ballot

Party leaders have said they plan to negotiate through November, followed by about two weeks to allow for a ballot of SPD members on the result, with the aim to have a government by Christmas. Negotiators will complete an agreement with a two-day meeting on Nov. 26 and Nov. 27, and a new government sworn in possibly on Dec. 17 or Dec. 18, the Leipziger Volkszeitung newspaper reported yesterday.

Merkel’s two red lines in coalition talks are her rejection of joint euro-area bonds and her refusal to raise taxes, according to a person familiar with her strategy. The SPD campaigned on raising the top income-tax rate to 49 percent from as low as 42 percent to bolster spending on infrastructure and education.

Merkel’s CDU and its Bavarian sister party, the Christian Social Union, spent weeks in exploratory talks, including overtures to the Greens party, before deciding to form a government with the SPD. The SPD this week approved the negotiations after setting “essential” conditions, including a national minimum wage of 8.50 euros ($11.72).

Merkel told her parliamentary group two days ago that negotiations on the minimum wage will be very tough, and that while there’s a degree of willingness to compromise, jobs mustn’t be put at risk, a party official told reporters. Merkel said she’s aware that wages in eastern Germany and in the agricultural industry are very low, and that employment could be harmed by imposing a minimum wage, the official said.

Merkel’s bloc dominates the Bundestag with 311 of the 631 seats. The SPD has 193, while the anti-capitalist Left Party and the environmental Green party have 64 and 63, respectively.

Before it's here, it's on the Bloomberg Terminal.