28 October 2013

German coalition negotiations commence

Angela Merkel's CDU/CSU and the Social Democrats are entering their first week of negotiating the substance of a new government, with the fight for control of the finance ministry looming in the background.

Mainly translated from the German

As Bloomberg reports, with more than a dozen working groups haggling over the details, the main 75 negotiators from Merkel’s Christian Democratic Union, her CSU Bavarian sister party and the SPD have started their official coalition negotiations.

The Frankfurter Allgemeine Zeitung and the Spiegel report that the SPD was apparently ready to forego the important office of finance minister in a Grand Coalition and the FAZ argues that this would be an important concession by the Social Democrats. Wolfgang Schäuble (CDU), who is currently holding this post and who, according to Reuters, has signalled that he would like to stay as finance minister in the new administration, has grown to become the most important member of the government besides the Chancellor. The move would also give Sigmar Gabriel, as a prospective vice chancellor who doesn’t intend to seek the finance post for himself, more leverage with Merkel, Bloomberg reported.

Instead of the finance ministry, the SPD’s leadership was seeking substantive concessions from the CDU/CSU in other areas, including holding seven or eight ministries, the Spiegel writes further. In particular, the SPD was interested in the ministry of transport, whose budget both SPD and CDU/CSU wish to increase by several billion euros in the upcoming legislative period.

The Welt am Sonntag was the first paper to report on these developments, claiming that even though denied by the party leadership, the Social Democrats were seeking to obtain more ministerial posts than had been held by the Liberals in the last government. Their reasoning was based on the fact that the FDP after the parliamentary election in 2009 with a score of 14.6 per cent got five departments - now with the SPD's 25.7 per cent result they should get proportionately more posts than the FDP had had. Ideas range from distributing the tasks of the Ministry of Food, Agriculture and Consumer Protection between several separate ministries, to establishing new ministries for energy and for integration. This would lead to a larger cabinet than in previous legislative periods, the latest having had 16 members. 

Andrea Nahles, general secretary of the SPD, has denied these claims in an interview with BILD, as reported by the Welt. For the SPD, it was content rather than posts that mattered, she said. "We get no yes to a coalition agreement from our party members for ministries obtained but only for the realisation of our goals, and thus for tangible improvements to the lives of retired people, of people requiring care or those who are on minimum wage etc." 

Looking forward to the finance sector negotiations, Nahles said in the same interview: "It is clear that we have to repay debt at the same time as complying with the debt ceiling and the need to make additional investments. All this must be based on fair, solid and reliable funding solutions."

Wolfgang Schäuble reiterated in an interview with Focus magazine his party’s position against tax increases, saying that he did not want a single tax to increase. However, he made no mention of plans to pay back Germany's just over €2 trillion debt, which he had still referred to as late as June. "We want to issue no new debt at all from 2015 and to keep it that way from then on", Schäuble told Focus magazine. "The debt ratio will decrease automatically if we issue no new debt and if the economy continues to grow. Our medium-term financial planning up to 2017 gives us some leeway but we can only count on that if we continue on our growth-friendly path", he said. 

The Süddeutsche Zeitung reports that SPD leader Sigmar Gabriel has formulated "red lines" that, he is convinced, must not be crossed during the negotiations. "The SPD will only present a coalition agreement to its members to vote on in which the SPD has prevailed upon the crucial points", Gabriel said in the party newspaper. He therefore expected "tough negotiations". As "crucial points", Gabriel once again named a comprehensive, legal minimum wage of €8.50, the curbing of contract and temporary work, and more money for education and for the cities and local governments. "Only if we prevail in these key questions, will a grand coalition make sense", he pointed out. The question of minimum wage is according to the Süddeutsche Zeitung the key topic that could convince the party members who are still disinclined towards a grand coalition with the CDU to vote for any negotiated coalition agreement at the end of November. The Frankfurter Allgemeine Zeitung reports on economits' concerns that a minimum wage at the level that would be much higher than the average OECD minimum wage and could mean a steep increase in unemployment rates.

First agreements

Reuters and the main German newspapers report that the CDU/CSU and the SPD have already agreed in their coalition negotiations quickly to introduce  the eurozone financial transaction tax (FTT). The Frankfurter Allgemeine Zeitung reports that a compromise could be a tax that has a lower rate but a wider base.

According to the Süddeutsche Zeitung, the SPD and the CDU/CSU have also agreed on the introduction of a mandatory quota of women on boards of private companies. But how this should look in detail remained as yet unclear. 

The Spiegel reported that a compromise between the CDU/CSU and SPD was also emerging in the dispute over dual citizenship. The SPD has been campaigning for the necessity to decide on one's citizenship to be abolished. CSU leader Horst Seehofer has now suggested a variant of the dual citizenship, whereby the rights associated with one citizenship were dormant as long as the person lived in the other country. However, this suggestion has been met with fierce resistance within the CDU/CSU's own ranks.

Further agreements in social, environmental and consumer protection are listed by the Frankfurter Allgemeine Zeitung.

European Policy - new alliance with EP President Martin Schulz

The Süddeutsche Zeitung further reports that the CDU/CSU and the SPD want to agree on a common approach towards the euro crisis by mid-November to avoid delays in upcoming EU negotiations on the planned Banking Union. Meanwhile, the parties stressed that the EU should "concentrate mainly on the big tasks for the future", while the European Commission’s involvement in public services such as water supply should be prevented.

Der Spiegel and Spiegel print edition report that "the German Chancellor finally seems ready to take control of - and responsibility for - Europe". What is meant by this is Merkel’s plans to forge an agenda with the SPD to extend to the European Union, as she seeks to coordinate with European Parliament President Martin Schulz. Schulz is a German SPD member with close ties to Gabriel. The SPD is prepared to scrap its support for jointly-issued euro area bonds in favour of a commitment to crack down on tax evasion, an EU investment programme in education and infrastructure, and a European growth fund, Spiegel said.

Another Spiegel article and EU-info concentrate on this new partnership and the fact that Angela Merkel wants to use her third term to in office to advance reforms on the European level and "shape her legacy". In a Spiegel comment, Gregor Schmitz criticises the SPD's hesitant approach to influencing the CDU's European agenda, arguing that foregoing the post of Finance Minister will be a mistake. 

In-depth analysis of the proceedings can be found in the Deutsche Bank Research German Policy Watch Paper on the coalition talks.

Meanwhile Deutsche Welle reports on the German government's biannual economic report, which sees the country’s economy on the threshold of a strong rebound. Berlin revised its 2014 growth outlook upward as private consumption and capital investment are expected to increase.