Merkel Closes in on Fourth Term With Her Familiar Coalition Ally

Updated on
  • Chancellor returns to world stage with Davos speech this week
  • Coalition accord still subject to final vote of SPD members
S&P Global Ratings Chief Sovereign Ratings Officer Moritz Kraemer discusses the political landscape in Germany.

Chancellor Angela Merkel moved forward in her bid to form a fourth-term government after her prospective coalition partner agreed to shelve its misgivings and enter negotiations on a common policy platform for Germany.

Merkel, 63, welcomed the outcome of Sunday’s vote by Social Democratic Party delegates in Bonn following what she termed an “intensive and contentious” debate. The chancellor’s Christian Democrats and their Bavarian allies will coordinate on strategy Monday, allowing talks aimed at a resumption of the so-called grand coalition to begin as soon as Tuesday.

The euro rose in early Asian trading on the prospect of an end to a near-four-month political stalemate that has gripped Europe’s biggest economy since last fall’s inconclusive election. CDU leaders are keen for talks to wrap up within two-to-three weeks, a timetable that would enable Merkel to move toward re-inauguration by Easter.

The decisive moment came at a special party convention called by the SPD to decide whether to move on to formal coalition talks on the basis of a joint policy outline reached between the two party blocs on Jan. 12. But rather than achieving unity, five hours of impassioned debate led to a show of hands that appeared too close to call. A subsequent formal count yielded the desired majority but underscored party divisions that could yet spell more political uncertainty ahead for Europe’s biggest economy.

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“Many who voted in favor weren’t convinced with their heart -- and that’s going to affect the negotiations,” said Josef Janning, head of the Berlin office of the European Council on Foreign Relations. The upshot is that the party’s decision to give its members the final say over any coalition pact is emerging as a bigger-than-expected hurdle.

The euro rose 0.4 percent early on Monday in Sydney, but later gave up its gains to trade unchanged at $1.2226.

Party Identity

Opposition to another grand coalition was led by young and leftist grass-roots members, who favor a period of renewal outside of government. They argue that allying with Merkel’s bloc for eight of her 12 years in power has robbed the party of a clear identity, sapping voter support.
 
Party Chairman Martin Schulz, who led the SPD to its worst result since World War II in the election, made the case for another tie-up as “the more courageous path.” He pledged to press for expanded commitments on health care, hardship rules for refugees who want to bring family members to Germany and curbing layoffs of temporary workers.

A go-ahead from party members for the coalition is far from guaranteed, Matthias Miersch, head of the SPD’s left-wing caucus, said in an interview. Merkel’s bloc “now has to shift” on policy, he said.

That idea received short shrift from leaders of Merkel’s party who met in Berlin later on Sunday. They welcomed the result in Bonn, but warned against any attempt to revisit the draft agreement reached in marathon talks earlier this month. “It’s not the CDU’s role to make SPD members feel good,” said board member Julia Kloeckner.

The result puts Merkel’s party critics on the backfoot for now, and renders less likely a repeat election or a minority government, both options filled with uncertainty. Italy’s Prime Minister Paolo Gentiloni praised the vote as a “step forward for Europe’s future.”

Merkel is already stepping back into the debate on Europe’s future, visiting French President Emmanuel Macron last Friday and scheduling her first speech in three years to the World Economic Forum in Davos, Switzerland, for Wednesday. Europe topped the list of initial policy priorities reached between the two sides, although polls suggest that dealing with the ongoing fallout of the refugee crisis of 2015-2016 is the most urgent matter for voters.

For Merkel, Sunday’s outcome offers some relief, Carsten Nickel, a managing director with Teneo Intelligence in Brussels, said by email. “But the real test is of course still ahead.”

— With assistance by Michael G Wilson

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