November 23, 2017
Today is the scheduled meeting between German President Frank-Walter Steinmeier and SPD leader Martin Schulz, and the German media expect some kind of a breakthrough - an agreement by Schulz to start talks with Angela Merkel.
The big question hanging over Berlin, and which gets some of the newspapers excited, is whether Schulz is going to do a U-turn over his executive committee's decision to refuse a grand coalition. We don't think this will happen, but SPD support for a minority government is possible.
The pressure in favour of another grand coalition comes from the SPD's influential right-wing group known as the Seeheimer Kreis. Founded in 1974, this part of the SPD has been the driving force of the party's departure from Keynesian economic thinking in the years since. They are heavily influential with SPD-supporting newspapers and journalists, but they are not a majority in the SPD. Schulz is a passive member of this group. One of the leading members is the party's economic spokesman, Carsten Schneider. That group is overwhelmingly in favour of a grand coalition, but they are not in a position to force the issue. It is possible that Schulz wiggles out of his dilemma through a referendum among SPD members, which we think would confirm the party leadership's decision not to enter into another coalition. Tagesschau has a detailed account of the debate inside the SPD. It quotes the president of the Seeheimer Kreis, Johannes Kahrs, as saying that he expects talks to start with Merkel, not necessarily about a grand coalition but about various forms of co-operation.
The SPD, especially the Bundestag group, seems genuinely split though we have not yet heard of a headcount beyond the initial estimate that 30 (out of 153) SPD MPs have voiced concern over the decision by the SPD's leadership. Most SPD MPs seem confused, as Tagesschau put it. Its report quoted MPs warning about political landmines and concluding that there is no easy option for the party. The clearest trend that is becoming clear is a wish to involve the party's wider membership, but this might end up killing the idea of a grand coalition.
We agree with the views expressed by Klaus-Uwe Benneter, the former SPD general secretary, who said that a grand coalition would be the end of the party. The SPD should instead start a reflection on why it lost the election.
Another issue is whether a grand coalition that is not fully backed by all SPD MPs could actually work in practice. In the last Bundestag, CDU/CSU and SPD had a majority of 80%. The two parties now have 399 seats out of 709, which is a combined share of 56% of the seats. That would normally be enough to form a government, but not if the SPD is divided. Merkel needs an absolutely majority, or 355 votes, during the first and second rounds of the election of the chancellor. It is a secret vote. There may be discontents inside the CDU/CSU group who may deny Merkel their support. We would not rule out that a grand coalition, even if agreed among party leaders, may not have sufficient support in the Bundestag.
In this context we noted an intriguing article in Die Welt, which made some interesting observations about the AfD in the new Bundestag, which is already operating even though the government is not. As we pointed out before, one of the problems with a Merkel-led minority government will be its eventual need to rely on the AfD, and this construction would push the CDU to the right - which Merkel wants to avoid. The report notes that the AfD started off in a constructive spirit, supporting the government in a vote to renew some, but not all, of the seven Bundeswehr mandates abroad. The AfD was not the critical vote, but MPs in other parties are beginning to realise that the day will come when that will happen. If the result of the current political process were a minority government, or if the current acting government were to continue, the AfD could become more important over time. This is particularly relevant on issues with a classic left-right divide. One issue where that may happen is the hotly debated question - due for a decision early next year - of whether to allow family members to join Syrian refugees in Germany. The CDU/CSU don't want this, nor does the AfD, but the other parties are in favour. One parliamentary tactic of the AfD is to make proposals that appear attractive to the CDU/CSU members.
One political option is simply to continue the current situation for six months or a year, until the SPD settles its internal debate. There is no need for a quick decision under the German constitution. In theory, the current acting government could last a whole parliamentary term. The Bundestag is fully operational already. But such a construction lacks political legitimacy, and could be construed as a hidden attempt to continue the grand coalition.
We also have stories on the Irish government in trouble; on the Greek government too; on the Commission's criticism of the French and Italian budgets; and on its broader strategy advice; on Setser's notion of a eurozone's impossible fiscal trinity; on whether Hammond's budget got the job done; and on Berlusconi's day in court in Strasbourg.