February 12, 2019
What the SPD's policy U-turn means for the future of the coalition
The SPD's policy U-turn on labour and welfare reforms is politically more significant than it appears at first. There is now, for the first time since 2005, a clear dividing line between SPD and CDU/CSU in a core area of economic policy. If one looks back at the history of German coalitions, it was always an economic policy issue that presaged the subsequent fall of the government. In 1969, the big theme for the then grand coalition was the devaluation of the D-Mark, which the SPD supported. The break of the SPD/FDP coalition in 1982 was preceded by the FDP's decision to question the fundamental tenets of the German welfare state. A paper written by Otto Graf Lambsdorff, then economics minister, became the casus belli for the subsequent divorce. Gerhard Schröder's red-green coalition ended precisely because of the Hartz IV labour reform - which also turned erstwhile SPD supporters into non-voters. After a gargantuan campaign effort Schröder managed a respectable election result in 2005, but it was not enough for him to form a government. Ever since, Germany politics was underpinned by a consensus over his labour and welfare reforms.
The SPD yesterday denied that the change of policies would mark an end to the coalition. We also cannot rule out that SPD and CDU/CSU could govern all the way until 2021, but the problem is now that the SPD wants to implement at least some of what it agreed internally - and there is a lot of resistance to that package in the CDU. The future of this coalition will depend on whether the SPD gains a boost in public support as a result of these policies. If it does, the temptation to break the coalition early increases.
We also noted an interesting man-bites-dog story in relation to the SPD's proposals for a rise in the minimum wage from the current €9.19 to €12 an hour. The trade unions have a real problem with this. Why do the unions oppose a big increase in the minimum wage when they were the biggest supporters of the minimum wage before it was introduced in 2015? The problem for them is that such a strong increase would effectively render redundant the minimum-wage commission, in which the unions are prominently represented. And it would make it harder for the unions to achieve wage negotiations successes. The SPD, not the unions, would get the credit for the wage rise for low-income workers. This is a side-show, no doubt, but an interesting one. If the SPD moves to the left, it will overtake the unions on the journey.