Watch out for political change in Germany

By: Wolfgang Munchau

Yesterday, I had the pleasure to stand on a podium in Berlin with two senior members of Germany's Grand Coalition. The discussion was about my recent book about the decline of the social market economy in Germany. Half-way through this discussion, which was unusually focused for a panel that included three politicians, came a remark from Peter Ramsauer, the leader of the Bavarian CSU in the Bundestag (which is part of Angela Merkel grouping), who said that he had reluctant entered into a this coalition, and that he found it intolerable to work with people like Andrea Nahles, the designated vice-chairwoman of the SPD, and a known leftist. Ms Nahles stood right next to him, and cringed.

 

I am telling this story because it is indicative of how physically intolerable the Grand Coalition has become for both sides. They truly cannot stand each other. Angela Merkel is trying to hold it all together. She has most to lose from a violent break-up. She could, in theory, even be toppled without an election, if SPD, the Greens, and the Left Party were to united and build a coalition. While the SPD has excluded such a coalition, the party's drift to the left is now clearly making such an alliance politically viable.

 

In a parliament with five parties (Christian Democrats including CSU, Social Democrats, Liberals, Greens, the Left Party), the coalition arithmetic can be complicated. All five parties will almost certainly re-enter the Bundestag next time, and no other party is likely to join them. No two parties of the five, except CDU and SPD, have a majority between them. Recent polls suggest that the CDU and FDP might have a narrow majority, but the polls said the same ahead of the previous elections, and were wrong. This means that the only alterative to a Grand Coalition is a three-party coalition.

 

There are three politically feasible three party coalitions - CDU, FDP, Greens; SPD, FDP, Greens; SPD, Greens, Left Party. Note that out of those three, only one includes Angela Merkel's CDU, and two includes the SPD. Now, the SPD is doing badly at the polls, with ratings of 25-27% at the moment. But this is a mid-term problem. I would expect the party's to recover to over 30% before year-end, and to remain in the 30-35% thereafter. This would be sufficient to prevent the CDU to able to form a two party coalition with the FDP, and to force a three-party coalition. The situation clearly favours the SPD, even if it has a smaller number of votes. The SPD could enter either three-party coalition. My guess is a coalition of SPD, Greens, and Liberals. This is not because the FDP is keen on such a coaltion. But the FDP is keen to return to government. If the FDP were to refuse to join the coalition, SPD Chairman Kurt Beck will still have the options of forming a three party coalition of the left, without the FDP. Game theory favours the SPD.

 

An alternative strategy would be for the SPD to leave the Grand Coalition before its scheduled end in 2009, saying within the next 12 months, and to form a government with the Greens and the Left Party under a chancellor Kurt Beck within the current legislative term. There are risks associated with this strategy, especially since Angela Merkel is relatively popular. Even this happened, the SPD might face a backlash at the next elections.  

 

Another possibility is for this coalition to come to a premature end, but with early elections, which would leave us with the previously described scenarios.

 

What are witnessing at the moment is the political comeback of the SPD. Its chairman has concluded that turning to the left is the best viable strategy for the party at the moment. From his perspective, that is a tactically correct assumption. Whether this is good for the country is another matter. I suspect not. But we should not fool ourselves. There are few genuine economic liberals anywhere in the German political establishment, not even in the liberal FDP. Most of the debate is about distributional issues, how gets what. They are largely irrelevant to the economy.

 

What I am sure of is that German politics is going to be interesting in the next couple of years.

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