Germany: GroKo or not to Groko?

CC copyright Flickr: James feat. Alexander D. Ricci

Tuesday, the editorial board of the The New York Times published an op-ed titled “Europe listens anxiously as German talks”.

The article refers to the informal discussions that are going on in Berlin between the Christian-Democratic and Christian-Social Union (CDU-CSU) of Chancellor Angela Merkel, on the one hand, and the Social Democratic party (SPD) lead by Martin Schulz, on the other one.

Wednesday, the parties will enter the fourth day (out of five) of explorative talks which are aimed at checking whether minimal conditions to enter official negotiations exist.

During the month of November 2017, the former so-called “Jamaica coalition” made up by the Greens, the Liberal party (FDP) and the CDU-CSU failed to strike an agreement after three tedious weeks of talks. Currently, a potential “GroKo” (short for “grand coalition” in German) appears as the only viable solution that could hinder another round of elections.
That is as well the reason why all parties involved in the GroKo pledged not to reveal any of the proceedings. Unfortunately, it was something of a “politicians word”. Over the past few days, several details about the ongoing talks surfaced and made the headlines of most German newspapers.

So what is the discussion about?

The main discussion points are linked to European and national fiscal policies.
Concerning Europe, the differences between the CDU-CSU and the SPD can be traced back to the reform proposals made earlier in 2017 by the French President, Emmanuel Macron. Macron would like to spur the integration process, increasing the investment-capacity of the Union and creating an ad-hoc European Minister for the Economy.

The German Social Democrats would bandwagon Macron immediately, whereas the CDU-CSU holds a less enthusiastic stance. All the more important, the CSU, Merkel’s ally in Bavaria, is extremely cautious, as it is sensitive to electoral competition from far-right parties such as Alternative for Germany (AFD). The latter formation campaigns on a “Eurosceptic” platform.

Opening up the box of Pandora of European policies, one of the most delicate issues is linked to the development of the European stability mechanism (ESM).

Many German conservatives would like the ESM to become a sort of “European IMF” with strong discretionary powers. The latter should take the place of the European Commission (EC) and strictly enforce economic rules and the “logic of fiscal responsibility”. Whereas this view is shared by Dutch and Austrian Governments, the German SPD and the French President hold a different one. According to Macron and Schulz, the EC should not lose powers and the ESM should back a stronger investment capacity of the Union.
For what concerns national fiscal policies instead, the SPD would like to increase the tax rate for higher incomes and decrease the share of individuals falling into the latter category. Yet, the CSU seems to oppose a similar strategy.

According to rumours, the parties agreed to lower environmental standards. If confirmed, the latter policy position could come in as a delusion to most of the SPD base. However, in exchange, it is understood that the CDU-CSU might give in to a more solidaristic refugee policy.

Meanwhile, what happened to the Greens and the Liberals?

Although most of the press made an early call for the “end of the Merkel era” after the breakdown of the “Jamaica” talks, it turned out that it was mostly the Greens and the FDP that suffered from it.

The leader of the Liberals, Christian Lindner, literally disappeared from the public debate (if compared to the degree of media-presence he enjoyed until November). The leadership of the Greens went further than that, as Cem Ozdemir, the party leader, announced he would not stand again for the internal elections of the party. As such, the Greens might shift further to the left in the upcoming months.

To GroKo, or not to GroKo?

So, will Europe cheer to a GroKo anytime soon? Generally speaking, that depends pretty much on the willingness of the SPD to enter such a grand coalition. However, it is not easy to determine which direction the Social Democrats will go. Personal — leadership related — incentives and collective — party related — ones could be at odds.

On the one hand, in electoral terms, the SPD would barely gain from another GroKo. A new poll just showed that the party is experiencing a historical low, breaking the bottom floor of 20 percent of voters’ shares. Not to mention that the youth-wing of the party is a staunch critic of another GroKo (SPD and CDU-CSU ruled the country together for the last 8 years). Not to mention the fact that a stunning 52 percent of German citizens oppose such an alliance.

At the same time, it might be worth noticing that Martin Schulz is lagging behind in all popularity indexes. It would be crucial to understand why he scores so bad. And, most importantly, why Schulz himself thinks he does. If the former President of the European Parliament links his personal situation to the current “deadlock status-quo” he will be tempted to enter into a GroKo, taking up the chance to steer a relevant Ministry, say Foreign Affairs. But if he understands disapproval rates as a proxy for the desire of radical left-wing policies, than the game would be to enter formal negotiations with the only objective to let them fail and let Merkel stand alone on the stage.

Indeed, according to many analysts, that’s exactly what happened at the time of the “Jamaica” negotiations. However, at the end of the day, it all turned out as a boomerang for the Liberals. Not to mention that Angela Merkel always said she would stand up again for her party in forthcoming elections, if necessary.

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