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Tortured Death of Germany’s Grand Coalition

Summary:
Germany's Grand Coalition has been on life support for years. Will SPD finally put the coalition out of its misery? SPD Leadership Contest Surprise Two little-known left-wingers emerged as surprise winners in an SPD leadership vote on Saturday. SPD is the junior partner in what's left of Chancellor Angela Merkel's no longer "grand coalition". Renegotiate the Deal The Guardian reports New Co-Leaders of Junior Coalition Partner Want Major Concessions From Merkel’s CDU. Germany is facing the prospect of months of political uncertainty with the collapse of the coalition, which has been fragile since its inception after the 2017 election, a growing likelihood. It also raises the prospect that Merkel, who has said she will not run for another term in office, will face an earlier exit from the

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Germany's Grand Coalition has been on life support for years. Will SPD finally put the coalition out of its misery?

SPD Leadership Contest Surprise

Two little-known left-wingers emerged as surprise winners in an SPD leadership vote on Saturday.

SPD is the junior partner in what's left of Chancellor Angela Merkel's no longer "grand coalition".

Renegotiate the Deal

The Guardian reports New Co-Leaders of Junior Coalition Partner Want Major Concessions From Merkel’s CDU.

Germany is facing the prospect of months of political uncertainty with the collapse of the coalition, which has been fragile since its inception after the 2017 election, a growing likelihood. It also raises the prospect that Merkel, who has said she will not run for another term in office, will face an earlier exit from the political stage than she intended.

Walter-Borjans and Esken narrowly secured first place in the SPD leadership vote on Saturday on 53%, beating the expected winners Olaf Scholz, the finance minister and vice-chancellor, and Klara Geywitz by eight points in a second-round runoff.

The result, delivered on a 54% turnout of the 425,000 SPD members, was a blow to Scholz, one of the architects of the grand coalition, and is widely seen as a vote of no confidence in him. The immediate focus is now on Scholz. If he decides he has to resign from his ministerial roles as a result of the defeat, the coalition would in effect be over, even if an election would not happen until well into next year.

Demands

Among their main demands are an increase in the minimum wage from €9 an hour to €12 and a backtrack on the government’s central fiscal policy of balancing the federal budget, known as the “schwarze Null” or the “black zero”, to allow for more spending on infrastructure and welfare programmes. They are also calling for a more radical approach on the climate emergency.

The CDU has made it clear it is unlikely to accept such demands. Speaking after the result, Paul Ziemiak, the party’s general secretary, said: “Our aim is to govern Germany well, and the foundations for this are in our coalition agreement. This internal decision by the SPD changes nothing in this regard.”

If the coalition dissolves, Merkel, who has been in power since 2005, would have to choose whether to resign, call a confidence vote, or attempt to lead a minority government under her leadership or that of someone else within the CDU, or to start negotiations over the formation of a new government.

The Financial Times says SPD Result Heralds the End of Germany’s ‘Grand Coalition’

It is not only the era of Ms Merkel, chancellor since 2005, that is drawing to an end. So, too, is the era of “grand coalitions” uniting her Christian Democratic party with the SPD.

Actually, the grand coalition effectively ended years ago.

But SPD and CDU still remain at the deathbed refusing to admit the patient has already died.

Why?

Perks. It's tough to give up limousines, big salaries, and other perks.

Even following this electoral surprise, it's still unclear if the new leaders or Scholz will officially call in the coroner to state the obvious.

Meanwhile, let's look at the polls for coalition replacement possibilities.

Germany Election Polls

The Union is CDU/CSU. Thus, the alleged grand coalition would get about 41% of the vote.

Coalition Possibilities

  1. CDU/CSU has ruled out a coalition with AfD. Besides, CDU/CSU + AfD + FDP only totals 48%.
  2. CDU/CSU + the Greens total 49. That total could get over the line. But the Greens would have to agree to be the junior player and they would place huge left-wing demands on CDU/CSU.
  3. CDU/CSU + SPD + FDP totals 49. But even if such an arrangement could top 50%, SPD has demands that neither CDU/CSU or FDP would accept. Besides, SPD is sick of these coalition governments with CDU/CSU as the senior partner.
  4. CDU/CSU + the Greens + SPD would total 63 but both the Greens and SPD would have even more demands CDU/CSU could not accept.
  5. The Greens + Die Linke + SPD would total 44. That's not enough. Besides, neither party wants to deal with the radical left Die Linke.

The coalition that makes the most sense position-wise is number 1. However, CDU/CSU has ruled that out. Then again, Merkel will be gone so there's a chance such a coalition will be in play.

Q: Why?

A: It's the perks, stupid. Free limos and all sorts of goodies for the government in power.

CDU/CSU Unpleasant Choice

CDU/CSU will have a choice to make: Agree to give the Greens huge concessions or enter a government with AfD.

It's not entirely CDU's choice. The Greens might not want to go along.

Who Holds the Winning Cards?

If CDU/CSU or FDP refuses to enter a government with AfD, then the Greens will hold the cards one way or another.

Possibly the Greens and SPD would be willing to hold their noses and enter a left-wing government with Die Linke, if necessary.

I believe you know the reason. Perks.

In any left-wing government, the Greens would be the senior partner. Thus, the Greens have every reason to not enter an arrangement with CDU/CSU unless they get major concessions.

Meanwhile, the coroner is knocking on the door. Will SPD or CDU let him in, or will they continue this tortured death at the risk of Greens and AfD strengthening further?

Mike "Mish" Shedlock

Mike Shedlock
Mike Shedlock (Mish) is a registered investment advisor representative for SitkaPacific Capital Management (http://www.sitkapacific.com/). Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

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