German Government

Going Dutch

RTS1933B
Taking cues on coalition building from a Dutch master. Source: Reuters

When Bavarian Prime Minister Horst Seehofer concluded his talks with German Chancellor Angela Merkel this week on how the center-right sister parties they head would approach talks for a new government, he wished everyone “Merry Christmas.”

This had less to do with who was getting gifts from whom in the pact between the two parties and more with the idea that maybe Germany will be able to form a new federal government sometime before the end of the year.

But the unprecedented situation in postwar Germany of hammering together a governing coalition out of four parties could well take longer. The Dutch coalition affirmed in power this week took 208 days to come to an agreement after the election in March, overtaking the previous record of 207 days. The Dutch have a tradition of difficult coalition talks and a strict protocol for conducting them. As Germany sails into uncharted waters in forming a government out of a fractious election, the Dutch example may well be a preview of the new normal in Berlin.

It is one thing for a country like the Netherlands to go for months under a caretaker government with limited possibility for new initiatives. Likewise, its neighbor, Belgium, managed to go 541 days without a new government after the 2010 election. But it is another thing altogether for the European Union’s biggest economy and political leader to be hobbled in such a way.

“It will take some time until a new government is formed in Germany. Chancellor Angela Merkel will have to make more compromises than before.”

David Zahn, money manager, Franklin Templeton

Even in Washington, as financiers from around the world gathered for the annual meeting of the International Monetary Fund and World Bank, attendees were abuzz with questions about the political situation in Germany. The country long seen as an anchor of stability for the EU and the euro suddenly seemed on the verge of becoming a problem child.

Both Ms. Merkel’s Christian Democrats and her partner in the outgoing grand coalition government, the Social Democrats, lost significant ground in the vote as the far-right Alternative for Germany (AfD) surged into parliament for the first time with nearly 13 percent of the vote. “That makes the political situation in Germany more uncertain than previously,” Nick Peters, a London-based money manager for Fidelity International, said on the sidelines of the IMF meeting.

The announcement on Wednesday that a total of 56 politicians from the four parties will be taking part in the talks could hardly allay concern that they would be prolonged and contentious. The testy nature of the talks between Mr. Seehofer’s Christian Social Union (CSU) and Ms. Merkel’s Christian Democratic Union (CDU) sent an early signal that the issues dividing the parties will be hard to resolve.

“It will take some time until a new government is formed in Germany,” David Zahn, a manager at Franklin Templeton, said in Washington. “In addition, Chancellor Angela Merkel will have to make more compromises than before.”

The four parties – CDU, CSU, Free Democrats (FDP) and Greens – will have to agree on a full slate of specific issues that will be spelled out in a coalition agreement regarding laws to be passed over the four-year legislative period. In the Netherlands, for instance, the four coalition partners produced a 55-page document on measures ranging from tax cuts to authorizing small cannabis plantations.

In a parliamentary system, it is in these coalition talks that many of the decisive debates and compromises take place. Then party discipline kicks in as deputies are expected to follow through on the agreements hammered out in the talks. Dutch Prime Minister Mark Rutte’s new coalition has only a one-vote majority in parliament, making that discipline crucial.

If Ms. Merkel succeeds in getting her coalition, her margin will be considerably more comfortable, with 393 votes, compared to a majority of 355 in a Bundestag that will have a whopping 709 deputies, the largest number ever for the lower house of parliament. (In Germany’s double-voting system, “overhang” seats must be added to the 598 statutory seats to make sure each party is represented according to its share of the vote.)

So the new government will have to get used to crowds, starting with the coalition talks. The 56 politicians who will take part represent 14 from each party, on average, with the CDU and CSU apportioning their delegation with 18 and 10 respectively in accordance with their relative strength.

“I consider it a cardinal error to enter into the negotiations with troop strength. It doesn’t build trust and is no basis for good and confidential negotiations.”

Wolfgang Kubicki, Deputy chief, FDP

FDP leaders mocked the large size of the party contingents, due to insistence by the Greens on a full representation. “I consider it a cardinal error to enter into the negotiations with troop strength,” Wolfgang Kubicki, deputy chief of the FDP, said in a magazine interview. It “doesn’t build trust and is no basis for good and confidential negotiations,” he said.

Mr. Kubicki, who helped form a similar coalition between CDU, FDP and Greens in his state of Schleswig-Holstein earlier this year, said delegations of just five or six would be more appropriate for the talks.

In the relatively simple talks to form the grand coalition in the wake of the 2013 election, it nonetheless took five weeks of negotiation, and then more time for parties to approve the coalition agreement, so that a government was sworn in December 17 after talks based on the September 22 election started on October 4.

Talks are getting off to an even slower start this time around because the CDU and CSU, which caucus together in Parliament and are lumped together as the “Union” parties, had a harder time agreeing on some issues, particularly a cap on immigration that the Bavarian party insisted on as a deal breaker. Only after Ms. Merkel agreed to a cap of 200,000 a year was the way open to talks with the other two parties. These are set to begin next week, and it is not likely the CSU has had its final say on other issues.

But neither the FDP nor the Greens will be in a hurry to make concessions. “Just because the Union frittered away three weeks, we won’t let ourselves be rushed along,” Mr. Kubicki said in another press interview.

As for the Greens, whose positions on environment and some social issues are well to the left of even the center-left Social Democrats, compromises will be even harder to come by. One top CSU official warned the Greens they have to reconcile themselves to being part of a center-right government. “We won’t put up with any crazy leftist stuff,” outgoing Transportation Minister Alexander Dobrindt said in a newspaper interview. Katrin Göring-Eckardt, a leader of the Greens, countered: “It is not especially smart to badmouth the identity of a possible future partner even before the first talks.”

Clearly, Ms. Merkel will have her work cut out for her and a coalition agreement by Christmas looks optimistic. Given her demonstrated political talents, it is virtually inconceivable that she would fail to cobble together a government. But it is possible. Since Ms. Merkel, like other party leaders, have ruled out any coalition with the AfD or the Left party, her only option at that point would be to convince the SPD to reconsider its refusal to join a new government.

If that were to fail as well, Germany could be forced to hold new elections, and then it would truly follow the example of the Netherlands, where parliaments serving full terms are more the exception than the rule.

Darrell Delamaide is a writer and editor for Handelsblatt Global based in Washington, DC. Handelsblatt reporters Martin Greive, Moritz Koch, and Susanne Schier contributed to this article with reporting from the IMF meeting. To contact the author: d.delamaide@extern.handelsblatt.com.

 

We hope you enjoyed this free article.

Subscribe today and get full access to market-moving news in Europe's leading economy.