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Was nun, Mutti? II: Merkel fights for her political future

Economic Comment

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  • The breaking down of ‘Jamaica’-coalition talks last night brings unprecedented political uncertainty to Germany
  • Parliamentary prevent a swift move to new elections; first talking with the SPD will be tried before thinking about a minority government
  • The political initiative and control is moving away from Merkel towards the President of Germany, Frank-Walter Steinmeier, who can ultimately trigger new elections
  • In any case, Merkel will be severely weakened from here on onwards. Macron will be looked at as the new de facto leader of Europe

Germany’s Brexit-moment?

The centre-right FDP ‘blew up’ German ‘Jamaica’-coalition talks last night. The move appears to have been in the works for a while; the press conference and subsequent outings in the media were a bit too smooth to be spontaneous. Merkel (CDU) and Seehofer (CSU) along with the Greens firmly lay blame with the FDP for the failing (scheitern) of the talks. This outcome leaves both ‘Mutti’ Merkel and Seehofer fighting for their very own political futures. The events have already been likened to Germany’s Brexit-moment. That is perhaps exaggerated, but the German political situation is now very unpredictable, more than in the past three decades.

Assuming the FDP is firmly out, three options for the future remain. First is a renewed push for a Grand Coalition with the SPD, the second is a minority government of CDU/CSU + perhaps the Greens, the third new elections (Neuwahlen). At the current juncture, this also seems the most likely order or timeline of potential events. The actual outcome is however impossible to predict. In this note we look closer at these scenarios and describe the formalities involved in Germany’s political and parliamentary rules and procedures.

Firstly, a renewed push for a Grand Coalition with the centre-left SPD. Schulz (SPD) has sworn not to pursue this and indeed even reaffirmed his view on Sunday afternoon (before the talks failed). This coalition is also undesirable from the point of view of the CDU, CSU and German voters, who voted strongly against this coalition. There may be high pressure from the President of Germany, German media and from other European countries on the SPD to do what is best for the country (and Europe). But then either Merkel or Schulz (or both) will have to go. Neither of the two leaders has a clear successor. This scenario may thus lead to stable coalition government that would finish its term eventually, but only after a period of high instability and uncertainty where both parties have to engage in soul searching under very high pressure. The SPD has already said in an initial response that – for now – they prefer new elections over a coalition.

German parliamentary rules: stability über alles

The next two scenarios (a minority government or new elections) involve more parliamentary action and will effectively put the initiative with the President of Germany (Bundespräsident), Frank-Walter Steinmeier (SPD). Appointed by the Bundestag (German parliament) in March 2017, he has openly opposed new elections. For Merkel, outcomes will be much harder to influence here as power in these cases lies with parliament and the President.

The German parliament, unlike many others, cannot vote to dissolve itself (a legacy from the instability during the Weimar-era). The President can write out new elections when the Chancellor fails a vote of confidence and when no other Chancellor is chosen. This course of action has been used on purpose before by Kohl and Schröder. But Merkel is only a caretaker Chancellor, which means that she cannot call for a vote of confidence. The other way elections can be called is if no Chancellor is chosen by parliament or the chosen Chancellor is rejected by the President.

Calling for a new Chancellor…

The President in that case has to call for a parliamentary vote for a new Chancellor (that he puts forward). In case the Chancellor receives no absolute majority in parliament (i.e. in absence of a coalition agreement), parliament can vote again on a Chancellor (same or different; multiple candidates possible) as many times as it wants (or never at all) in the following 14 days. If the 14 days pass without success, a third phase is possible, where a relative majority (i.e. most votes) counts. If parliament then chooses a Chancellor with an absolute majority, the President has to appoint him/her within a week. If a Chancellor is chosen with only a relative majority, the President can choose to accept the outcome (ie accept a minority government) or reject the candidate and write out elections. These then have to take place within 60 days. This whole process could start early next year when all options have failed, resulting in elections before Easter (1 April).

… or fresh elections altogether?

The only party who seemingly stands to gain from new elections are the AfD. Since the German political establishment is firmly opposed to this party, new elections are seen as highly undesirable. Merkel would probably also not be able to run again in this case. German politicians also see a minority government as highly undesirable. This stems from the Weimar-era (1919-1933) when Germany was a young democracy where (minority) governments were very unstable and elections frequent. Most notorious are the governments of Brüning and Müller that only lasted 7 and 3 months, respectively. The turmoil of this period is seen as contributing to the subsequent rise of the Nazi party.

But assuming that history will repeat itself is probably too farfetched: contemporary Germany is very different and firmly democratic. A minority Black-Green (CDU/CSU + Greens) government could yet be formed and receive support from the FDP and/or SDP. According to Bild newspaper this morning, the FDP are open to this possibility.

The end of Merkel?

It becomes clear from the scenarios outline above that Merkel’s future is quite uncertain and that the initiative is starting to move towards the President of Germany, Steinmeier, and the SPD. Merkel has to fight with everything she’s got for her political future. Any outcome imaginable with her still in command (a renewed Grand Coalition or a minority government) will see her power greatly diminished.

The German economy will likely remain on full steam ahead regardless of what happens in the political arena, for up to 6-12 months. We have seen this before in other countries where it took a long time to form a government, e.g. Belgium, Spain and recently the Netherlands. From a long-term perspective though, it would be desirable to have certain policy changes. The budget surplus for instance is projected to increase further in the case of no change.

We feel that, in the near-term at least, EU policy could suffer the most from the absence of German leadership, as it may stall initiatives for further integration. Merkel has already said she will take no further steps when she’s still a caretaker Chancellor, which in the best case could be for months longer. Macron will therefore be looked at more and more in the coming months as the de facto leader of Europe, something unimaginable only half a year ago.

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Author(s)
Daniel van Schoot
RaboResearch Global Economics & Markets Rabobank KEO
+31 30 21 30381

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