04 December 2013

"Groko" - Germany on its way to a new government

Mainly translated from the German

The contract for a new grand coalition government between Angela Merkel’s Christian democrats and the Social Democratic Party has not met with much enthusiasm in the German press. The Frankfurter Allgemeine Zeitung is critical of the agreement, arguing that all three parties' main objective was that their imprint was noticeable on the final agreement, resulting in a plethora of social welfare measures whose costs will be felt by generations to come. Ulf Porschardt argues in Die Welt that in view of its decision to fatten up its welfare state in times of austerity, Germany can no longer serve as a model to Europe. Writing for Spiegel Online, Wolfgang Münchau states that "the new government is ignoring the crisis in Europe". He is additionally wary of grand coalitions as he blames the last grand coalition government (2005-2009) as one of the main culprits for the ensuing euro crisis.

Germany’s proposed new coalition government has coalesced around a set of policies that threaten to reverse some of the very reforms that made Germany successful, reports the Economist. The country’s economy has been living off past glory—especially "Agenda 2010", a series of reforms launched in 2003 by Gerhard Schröder. The coalition’s 185-page "treaty" was a chance to launch a new reform agenda. Instead, its proposals are a mixture of the irrelevant — charging foreigners to use German motorways—and the harmful; with a national minimum wage of €8.50 and generous, retrogressive new pension policies. The impact of this coalition on the rest of Europe would not be all bad. One bonus is that, for all its primitive economic policies, the SPD seems keener to support some basic reforms such as the creation of a Banking Union. But that will count for little if Germany, the motor of Europe’s economy, stalls. And, in the light of the coalition agreement, that is a real danger.

The Financial Times (subscription required) warns that one of the reasons for the arguably poor outcome of the coalition agreement is to be found in shifting demographics: Data just released by the German demographic institute show that the country’s population has the highest median age of all EU countries – 45 years, compared with 39.7 for the UK and 35 for Ireland. No surprise, then, that the political parties are willingly following the shifting majorities through the age structure of German society. Both big mainstream parties have become parties of the old. This is the strongest political message the new coalition sends out, albeit inadvertently. If this message sticks – that the old have won – then Germany will lose the confidence of a young, educated generation, and will in the end lose its future.

Representatives of business and economic think-tanks have commented with dismay on the route the new coalition is about to take. The chancellor’s response has been curt. The outcome of the September election, in which the CDU fell just short of an absolute majority, could – on paper at least – have resulted in a rival coalition with policies far more damaging to German economic interests.

Recent opinion polls indicate a dwindling of early support for the grand coalition. But at the same time the polls also show that among Germans the preference for social stability over economic freedom remains high and unshaken. As Welt reports, a recent survey shows that 52 per cent of Germans agree with the coalition agreement, especially with the deduction-free pension at 63 - no matter how many billions it costs. According to the current ZDF "political barometer", the majority of voters is satisfied. Only 26 per cent expressed a negative evaluation of the outcome, whilst 22 per cent refused to make any assessment. Interestingly however, 79 per cent of respondents doubted whether the coalition plans could be implemented without new debt or tax increases.

Nearly three-quarters (73 per cent) expect that the vote for the negotiated coalition agreement will be approved by the SPD membership, only 18 per cent expect a rejection. Even a great majority of supporters of the SPD (80 per cent) believes that the SPD members will agree.

The Frankfurter Allgemeine Zeitung also reports on the likely approval by the SPD membership. According to Emnid and Forsa polls, between 70 and 78 per cent of SPD supporters would vote for the coalition agreement as presented. However, how the SPD membership, will actually decide on the draft coalition agreement will only be known in mid-December. The result of the vote is expected on the 14 or 15 December.

SPD General Secretary Andrea Nahles considers the outcome of the vote still open, but said she was optimistic that SPD members would agree to the agreement. A simple majority would be sufficient, but she expected a clear decision for a grand coalition, she told the Welt am Sonntag.

The Süddeutsche Zeitung reports that there is considerable debate within the SPD about the allocation of responsibilities and ministerial posts. Much seems to be still open, but party leader Gabriel has already confirmed that three of the six ministerial positions that the SPD can claim would be filled by women. There are conflicting reports as to whether the cabinet has essentially been decided upon already or whether it has just been talks with no decision to date. The key position of Finance Minister is expected to remain in the hands of the CDU after reports in the election campaign that the SPD would forego this postition. SPD circles have denied that this had already been fixed. 

Meanwhile Spiegel Online drew attention to the fact that whilst the grand coalition is taking shape, the 'mini opposition' is voicing concern. The opposition is facing four years ultra short allocated speaking times and hardly noticeable influence in committees or debates. The CDU/CSU is apparently not inclined to support change of the rights of the small minority in parliament but rather advocates the model of "voluntary commitment". The Left Party and the Greens however are pushing for fixed changes in the parliamentary rules of procedure, which would be a more more long-winded but also more binding way of assuring the rights of the smallest opposition in 40 years. 

Further commentary and think tank reactions can be found here.