Toward a new coalition government: Germany’s European plans

The prospect of a new coalition government in Germany is long overdue for obvious domestic reasons (a country needs a government that can do policy work), but also in the European context. Germany’s European partners, France in particular, have been waiting anxiously for a reliable German government to form. They want to know which direction the country will take.

During the electoral campaign, Europe played a marginal role – possibly because there was wide consensus among the mainstream parties that the EU and its institutions need to be strengthened and that the only way forward is through a strong union. In essence, the Christian Democrats (CDU) were open to a reform of the Eurozone, but did not necessarily want to spend too much money on it. Meanwhile, the Social Democrats (SPD) were willing to go further, more in line with French President Emmanuel Macron’s plans for an increased budget paired with deeper institutional reform. Angela Merkel’s position was less clear.

With the January 12th provisional agreement between the two parties involved in coalition talks, this has changed. It is remarkable that now Europe appears as the first item on the agenda. The fact that SPD leader Martin Schulz emphasized that Europe must be at the heart of the agreement sends a strong message. He promises “concrete proposals that will lead to a European minimum wage, as well as to minimum social standards.” He also calls for a “social pact” that would help combat youth unemployment across the EU. This was not a priority of the CDU, which was more focused on budgetary discipline, yet it was worth reprioritizing  in order to enter into government talks with the Social Democrats. Furthermore, both parties agree with the idea of refining the European Stability Mechanism by turning it into a “European” Monetary Fund. This had originally been proposed by former CDU Finance Minister Wolfgang Schäuble. Thus, the agreement reached entails both demands by the Christian Democrats and by the SPD, although the latter was able to include more in this particular area.

The CDU also committed to contributing more to the EU budget. Apart from compensating the loss of the second largest net-contributor, the United Kingdom, this would enable institutional reform and initiate measures aimed at European youth, such as extending the “Erasmus +” program. As the former head of the European Parliament and possible future German Foreign Minister, Schulz would thus be able to do deal with issues that truly matter to him – shaping EU reform and democratizing the institutions.

His counterparts, Angela Merkel and Horst Seehofer, the leaders of the CDU and its ally, the Bavarian CSU (Christian Social Union), did not need to make too many concessions in order to persuade the SPD to change its mind about holding government talks. The willingness to give in on European affairs is based on two factors: According to the Institut der deutschen Wirtschaft (Institute of the German economy, an independent research organization), thanks to high tax revenues and budgetary discipline, the next government will have 52 billion euros at its disposal to spend in this term. Also, commitment to certain reforms in Europe does not necessarily mean that they will in fact be fully or rapidly implemented, as of course implementation depends on the other member states and EU institutions.

Whereas the Social Democrats seem to have largely prevailed in the policy area of European affairs, in many other areas they have not. They were neither able to push through an increase of the top tax rate for high-income earners nor an introduction of a new public healthcare scheme. Moreover, they had to accept a de facto limit of refugees coming to Germany as demanded by the CSU – 180,000 to 220,000 per year.

This is why it is far from certain that the party members will ratify the agreement in the next few days or weeks. Today, significantly more members are highly skeptical of entering a new coalition with Angela Merkel’s Christian Democrats as the SPD has come out diminished after four years in government with her.

If everything goes as agreed by the party leaders, the next steps for the Social Democrats include the ratification of entering coalition talks on a federal party conference. Even after controversial debates, fueled especially by its youth organization, the Jusos, the decision by the SPD leadership will probably be ratified. However, it is less certain whether the 440,000 party members will vote in favor of a coalition deal negotiated by their leadership.

Does this uncertainty mean that the German political system can no longer guarantee stable governments? It means that the importance of internal party democracy has grown and now significantly shapes the decisions of its leaders and their consequences. Both scenarios of entering a coalition with the CDU/CSU, as well as voting against a potential coalition deal, could mean inflicting substantial self-damage on the SPD. The latter would lead to new elections in a torn party climate and with either a discredited or a totally new and inexperienced leadership.

The question remains whether the scenario unfolding now shows an inherent flaw of the political system in Germany. It is true that this would be the third great coalition in the last four terms. However, the reluctance by all parties to form such a government shows that this model will not last in the long term, as was the case in Austria in the past. However, in Germany, the formation of a government between the CDU/CSU and the SPD is not a given since it is neither taken for granted nor a favored solution by either of the partners. The election in September 2017 led to special circumstances, in particular the entrance of the far-right AfD into the Bundestag as the third largest parliamentary group, as well as the pre-coalition talks between the Free Democratic Party, Greens and CDU/CSU.

The current situation shows that the German parliament is in fact not passing any new legislation, which suggests that there is a political stalemate. On the other hand, Germany does have an acting government honoring its international commitments and running its domestic affairs. Two conditions would need to be met in order to determine if there is a need for electoral and constitutional reform in Germany: If the formation of a government is protracted for too long (as in previous years in the Netherlands and in Belgium) and if the outcome of the next elections is similar to September 2017. Only then will it be possible to assess whether the current problem is of a political or of a constitutional nature.