23 September 2013

Implications and uncertainties after Merkel's election triumph - Commentary review

European commentators at British Influence, the SEJ, Bruegel, Brookings and the FT analyse the uncertainties, European implications and possible coalition scenarios that follow on from the federal election results.

In a special report for British Influence, David Gow writes:

"Angela Merkel pulled off a remarkable coup: she not only secured an historic third term, but she did more: by polling almost 42 per cent, close to an absolute majority, she reshaped the German political landscape. But the European political landscape, ironically, is likely to remain relatively untouched after a German general election. Merkel’s policies towards the eurozone/EU have been reaffirmed by her home voters and so change is unlikely.

What is clear, at least on initial analysis, is that the Alternative for Germany (AfD), the anti-euro party, took enough votes from the FDP – and Merkel’s CDU – to prevent a further term for the "black-yellow" coalition of the two. It polled just short of the 5 per cent hurdle at 4.7 per cent. Merkel now seems to prefer a repeat of the 2005-09 grand coalition with the social democrats (SPD). A coalition of CDU with the Greens is theoretically possible but neither side wants it. Party executives have begun debating the outcome but coalition talks could take weeks."

In his point-of-view piece for British Influence, Peter Wilding writes:

The German election result means that nearly half of Germans (28 per cent didn’t vote, and 16 per cent voted for parties that didn’t cross the 5 per cent threshold) voted for parties which failed to get into the Bundestag. Also, given the better than expected showing of the anti-euro Alternative für Deutschland (AfD) party, 20 per cent of voters seemed to give a thumbs-down to the euro. However, commentators are not focusing on those discomforting conclusions. In the UK this would doubtless have been the story.

A grand coalition is more than likely. But there is fanciful talk of a black-green partnership. Merkel’s hug-a-huskie environmentalism as demonstrated by her abandonment of nuclear power opens the door to an intriguing opportunity. Tories also need to take note that Merkel may accentuate the 'compassionate' side of the centre-right but her conservatism is essentially inactive. This is why an alliance with the SPD is more probable.

It was extraordinary that foreign affairs played no part in the election. German media mentioned the UK not once. The much-vaunted Cameron-Merkel alliance, central to British European policy, is on nobody’s lips. Right now, without a clear European policy backed by active diplomacy, Britain is in a sitzkrieg, making much noise at home but doing very little which is visible abroad. This is greeted with a resigned shoulder-shrug here and is frankly embarrassing. If Merkel forms a grand coalition with the SPD, the chances of the next German government offering any gifts to the British PM on social policy or other EU opt-outs are small.

© British Influence 2013

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Writing for the Social Europe Journal, Andrew Watt says that:

"The results of the German election are clear. The interpretation is not. Incumbent Merkel remains Chancellor after an impressive performance by her CDU/CSU conservatives. Yet, her position is, ironically, weaker than before, at least in the short term as she needs a coalition with a party of the centre-left, either the social-democrats or Greens. Although neither party will be keen, in the end one of them – most likely the SPD – will enter government as a junior partner.

That will mean a somewhat more progressive domestic policy and also European policy (at least a nod towards the need for less austerity and more investment). Consider that mildly good news for Greece and the other crisis countries, and for the gradual resolution of the euro crisis more generally.

Together, the SPD, the Greens and the Left Party have an arithmetic majority in the new Bundestag. The domestic social and economic policies of the three parties are not so far apart that a coalition would not be possible, not least because both the SPD and Greens had moved leftwards in the campaign. But it will not happen. An historic opportunity has thus been missed. Worse than that, the long-term prospects for left-of-centre cooperation have probably deteriorated."

© 2013 SEJ

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Writing for Bruegel, Daniela Schwarzer and Guntram B Wolff remind Merkel that there are still some fundamental risks the next German government will have to address:

• Competitiveness adjustment is incomplete, casting doubt on the sustainability of public debt.
• Banking remains unstable and fragmented along national lines, resulting in unfavourable financial conditions, which further erode growth, job creation and competitiveness.
• Rising unemployment, especially among the young, is inequitable, unjust and politically risky.

© Bruegel 2013

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Douglas J Elliott writes for Brookings that:

The results of the German elections combine a great personal triumph with a political dilemma. Angela Merkel's party dominated the election, but she lost her favoured coalition partner and will be forced to work with one of the left-wing parties.

We are now in for weeks of difficult coalition negotiations with her two potential left-wing partners. The resulting coalition agreement will strongly influence government policy for the next several years, including in regard to the euro crisis. Yet it is difficult to know what will be agreed upon, although it is unlikely there will be any major deviation from existing policy on Europe.

© 2013 The Brookings Institution

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Martin Wolf writes for the Financial Times (subscription required):

Angela Merkel’s remarkable election result confirms her position as the dominant politician in Germany and so also in Europe. It is assumed she will get the eurozone she wants: Germany writ large. If that proves right, it is going to be a deeply depressing spectacle. The eurozone is essentially trying to become a bigger Germany, with a mixture of rising productivity and collapsing demand having driven vulnerable economies into external balance.

Meanwhile, Germany is redirecting its surpluses outside the eurozone. To the extent that this helps solve the eurozone’s internal problems, it does so by exporting bankruptcy elsewhere. This attempt to export its difficulties via beggar-my-neighbour policies is inconsistent with the eurozone’s obligations inside the Group of 20 leading countries. But it also will not work, for two reasons: first, the eurozone is far too big to achieve export-led growth, as Germany has done; and, second, the currency is likely to appreciate still further, thereby squeezing the less competitive economies all over again.

© The Financial Times Limited 2013