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December 18, 2017

SPD regional party preemptively rejects grand coalition

It may not mean all that much that the SPD organisation in state of Thuringia has already, and preemptively, rejected the grand coalition. The talks haven't even started, there is no deal on the table and, who knows, Martin Schulz may pull off a few surprises in the upcoming talks.

But, as of now, we sense no support for a grand coalition and no shift in the overwhelmingly negative views of SPD members. Two senior SPD leaders spoke at the regional party congress: the deputy leader Thorsten Schä­fer-Güm­bel and Carsten Schneider, who represent the left and right wings of the party respectively, and who both support the official policy of seeking talks with the CDU/CSU.

One of the people who are pressing hard for a new grand coalition is Sigmar Gabriel, who hopes to secure the job of finance minister in such a construction. He writes in Der Spiegel that it does not matter for the survival of the SPD whether it is in government or not. This is a statement many SPD members, including Schulz, do not agree with. Gabriel is urging the party to shift to the right by embracing a nationalist concept - the notion of the innate superiority of German culture ("Leitkultur"), a notion once championed but later dropped by the CDU, and bitterly opposed by all the other parties in the Bundestag. 

It is astonishing to see the extremes people go to in order to keep their ministerial limousines.

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December 18, 2017

Future of eurozone to be decided by March - we can hardly wait

It was a nice symbolic moment when Angela Merkel and Emmanuel Macron appeared in their first joint press conference after a European Council. They said they hope to reach agreement on eurozone reform by end-March. 

Wolfgang Munchau notes that there have been four substantive proposals on EU reform this year - by Macron, the German finance ministry, the European Commission, and Martin Schulz. Those of the Commission and Schulz are compatible with each other, but are rejected by a large majority of member states. The key element of the German finance ministry's proposal - the semi-automatic bail-in - is being rejected by France. In return, Germany will reject any notion of fiscal transfers or eurobonds. So we live in perfect gridlock on this issue. There is still room for formulaic compromises and Munchau expects that there will be some minimalist agreement, but none of that addresses any of the issues that need to be addressed - such as the separation of banks and their sovereigns, macroeconomic imbalances, or high youth unemployment. Munchau says that, on the development of banking union, Germany has not shifted policy. The policy has always been that a European deposit insurance scheme (EDIS) will only be acceptable after the banking system is cleaned of all its legacy debt. It makes no difference whether you say EDIS is acceptable after the conditions are met, or unacceptable until they are met. A solemn commitment to complete the banking union is thus meaningless. As we saw in Italy, the inter-dependence of the banks and the state has, if anything, increased since the start of the banking union. German officials are telling us that they see the banking union moving in the wrong direction. You can do the math on the third stage.

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