Bloomberg News

German Stalemate Points to SPD Dilemma Over Alliance With Merkel

September 19, 2013

SPD Leader Peer Steinbrueck

SPD leader Peer Steinbrueck has said repeatedly that he’ll only serve in a government led by himself with the Greens as junior partner. Photographer: Krisztian Bocsi/Bloomberg

Elections in three days augur a second campaign for Germany’s Social Democratic leaders: persuading their rank and file to join as Angela Merkel’s junior coalition partners.

The SPD has scheduled a meeting of 200 party members on Sept. 27 to decide how to proceed with coalition talks with its traditional rivals that would ensue if Merkel and her current allies, the Free Democrats, fail to win a majority.

“There are many within the SPD who oppose the idea of going into a grand coalition” with Merkel’s bloc, Manfred Guellner, managing director of pollster Forsa, said by phone. He identified those who most fervently reject a partnership with Merkel as “party functionaries” who need to be convinced of the benefits of entering another government with the chancellor.

The potential roadblocks are both political and substantive for the SPD. As a junior partner, the party would effectively be putting its fate in its opponent’s hands. And it would have to reconcile policy differences on issues such as taxes, health care and the European debt crisis.

Holger Schmieding, chief economist at Berenberg Bank in London, downgraded the chances of a repeat of Merkel’s coalition with the FDP to 40 percent compared with 45 percent for a grand coalition, according to a note yesterday.

He sees a 10 percent risk that the SPD declines to join Merkel to team with the Greens and the anti-capitalist Left Party to oust Merkel, a scenario that the SPD leadership has repeatedly rejected. “This could cause a serious upset for markets,” Schmieding said. “But it is just a tail risk.”

Poll Signs

Polls suggest the SPD, led by Peer Steinbrueck, and Merkel’s Christian Democratic-led bloc may be forced into the same coalition configuration that they shared between 2005 and 2009 during her first term. Their partnerhip ended with the SPD’s worst post-World War II result at 23 percent of the vote, a tally many in the party blame on the grand coalition.

The rise of the anti-euro AfD party, taking votes from the coalition predominantly, may spur an alliance of the SPD and the CDU. An INSA poll for today’s Bild newspaper put the AfD at 5 percent, enough to enter parliament for the first time.

The AfD’s entry to the lower house would leave a grand coalition “as the only real option,” said Dirk Schumacher, an economist at Goldman Sachs Group Inc. in Frankfurt. While AfD seats in the Bundestag “would have no immediate impact on Germany’s approach to Europe, it could slowly but steadily change the dynamics of German politics over time,” he said.

SPD Triumverate

The SPD’s leadership under Steinbrueck and Chairman Sigmar Gabriel has insisted that its only objective is to form a government with the Green Party, even though the party has stopped short of ruling out a grand coalition. Steinbrueck has said repeatedly that he’ll only serve in a government led by himself with the Greens as junior partner. Steinbrueck, Gabriel and Frank-Walter Steinmeier, the foreign minister in Merkel’s first term, will all address an SPD rally in Berlin from 6 p.m.

Merkel has also dismissed a grand coalition option.

“Nobody wants that,” Merkel said in an Aug. 18 interview with broadcaster ZDF. “I hear that from all sides.”

Still, most polls show Merkel may have little choice. Her CDU-led bloc and the FDP together had a combined 44 percent in today’s INSA poll, a result that may give them fewer than half the seats in the Bundestag. Support for the SPD-Greens bloc was 36 percent, far short of a majority. The Left had 9 percent. The survey of 2,502 voters between Sept. 10 and Sept. 16. published no margin of error.

Last Time

The first grand coalition, in which Steinbrueck served as Merkel’s finance minister, resulted from an inconclusive vote. Merkel, the top vote-getter then, the government after former Chancellor Gerhard Schroeder surrendered his claim to the job.

Together, Merkel’s faction and the SPD under Schroeder ally Franz Muentefering as vice-chancellor undertook overhauls such as raising the retirement age to 67 from 65. That alienated the SPD’s union and activist base, which had already decried Schroeder’s reduction of unemployment benefits and loosening of rules governing hiring and firing.

In September 2009, the SPD was cast into opposition after 11 years in government following a defeat that then-SPD candidate Frank-Walter Steinmeier called a “bitter day.”

Compromises today may be equally tough to swallow. While the SPD has pledged to raise taxes on top earners, Merkel has opposed such increases as “poison to economic growth.”

On the debt crisis, the SPD has said some form of joint euro debt liability is inevitable. Merkel has stood against such risk sharing throughout the crisis, saying that would remove the incentive for indebted states to balance their books.

Party Congress

The SPD has a party congress scheduled for Nov. 11-14 in Leipzig. Should it enter into talks with Merkel, an agreement could be ratified then, meaning that a new government wouldn’t be sworn in for almost two months. In 2005, Merkel didn’t take office until more than two months after the election.

In any case, the SPD won’t be entering a prospective union with Merkel with the same bravado it did after the September 2005 vote, when the then-chancellor came from far behind in the polls and fell just short of defeating the CDU leader.

“Do you seriously believe that my party would take up an offer of talks by Mrs. Merkel on this point with her saying that she wants to be chancellor?” Schroeder said on live television the night of the defeat. “Excuse me, let’s not get carried away here.”

To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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