Fra BNP Paribas:
The Union parties and Social Democrats have started talks on resolving the deadlock in
German politics, but only to explore the possibility of proper coalition negotiations.
If they materialise, coalition talks are unlikely to be either easy or quick, given
disagreements between the CDU/CSU and SPD on several key policy areas.
Ultimately, it will probably be up to the Social Democrat base to decide whether negotiations
take place and whether any eventual deal will indeed result in another grand coalition.
Currently, the majority of SPD members object to this idea. A key concern within the party is
that another government with the Union parties could harm its popularity.
Overall, though, both the SPD and the Union parties are steadily losing voter support.
On 13 December, leaders of the Christian Democratic Union (CDU), its sister party, the
Christian Social Union in Bavaria (CSU), and the Social Democrats (SPD) met for their first
exploratory talk on resolving the current deadlock in German politics.
Over the coming weeks, discussions look set to continue to explore the feasibility of formal talks on renewing cooperation between the parties, which have governed as a ‘grand coalition’ since 2013. The SPD leadership is due to decide on Friday, 15 December, whether to continue the discussions. The senior leaderships of both Union parties seem to favour another grand coalition with the SPD, but the latter remains deeply divided on the issue.
The alternatives being considered by the Social Democrats are extending support to a minority CDU/CSU-led government or forming a ‘cooperation’ coalition (KoKo), which would focus on a few key policy areas but leave the parties free to seek parliamentary support for their proposals in others.
The Union parties, however, have rejected the KoKo idea, floated earlier this week by SPD
Chairman Martin Schulz. This implies that unless the CDU/CSU and SPD agree on a proper
coalition deal, the only remaining options will be a minority government or an early election.
Given deep divisions among the SPD leaders and party members on renewing the grand
coalition, it seems that the Union parties would need to make major concessions towards the SPD policy agenda to improve their chances of securing an agreement.
The policy proposals of the CDU/CSU and SPD diverge in several key areas. Beyond
immigration policy, there are major disagreements over social and tax policies (see, for
example, Die Zeit from 13 December 2017). For instance, the Union parties oppose the SPD’s proposed changes to health insurance. Further, the SPD is calling for cuts in income taxes and social contributions for lower- and medium-income households and increasing the marginal tax rate on higher incomes.
While the CDU/CSU does not oppose a cut in income taxes, it is against a cut in social
contributions and a tax hike for the rich. The SPD also wants a sizeable increase in the
minimum wage, a rise in retirement benefits for low earners and a stabilisation of the
pension/wage ratio at 48% by 2030. Those proposals are fully or partly rejected by the Union parties (for more on the parties’ agendas, please see German election: No easy wins,
In terms of foreign policy, it seems that the idea of a United States of Europe by 2025 endorsed by Mr Schulz during last week’s SPD convention did not receive great support either from the Union parties or even within his own party. However, since both the CDU/CSU and the SPD a pro-European agenda in government since 2013, we would expect a new grand coalition government to continue in that vein.
Divergent policy agendas suggest that the road to proper coalition talks – and eventually,
perhaps, a coalition deal – would be rocky and long. In terms of dates, following the
‘exploratory’ talks, the SPD is expected to hold a special party convention in mid-January to
decide whether to enter formal coalition negotiations with the Union parties.
Assuming a green light, the parties might take another few weeks to hammer out a coalition. And assuming that is done, the SPD would then be expected to ballot its members over agreeing to the deal, as was the case in 2013. Therefore, the support of the SPD rank and file is likely to be crucial. Recent surveys suggest that only about a third of its members support forming another government with the CDU/CSU (see, for example RTL/n-tv-Trendbarometer).
The key concern among Social Democrats seems to be that another grand coalition would
further weaken the party’s popularity, which has stabilised just above 20% after the September Bundestag election (Chart 1). But it appears that a grand coalition with the SPD is not necessarily helping the Union parties, either, in terms of popular support.
According to some political analysts, the coalition agreements in place in 2005–09 and 2013–17 could have been a factor in strengthening the extremes on both the right and left of the political landscape. Irrespective of whether this is the case or not, it is evident that Germany’s two largest political groupings have been steadily losing voter share for years. Their combined share of votes hovered around 80–90% from the late 1950s to the late 1980s (Chart 2).
The advent of new forces such as The Greens and The Left saw the combined support for the CDU/CSU and SPD drop to 60-70% until the mid-2000s. Since then, with the emergence of the right-wing nationalist. Alternative for Germany on the political scene and its rising support following the eurozone sovereign crisis in 2012 and the migration crisis in 2015, the popularity of the main German parties has slipped to slightly above 50%.
Extrapolating the trend would suggests that, even if another grand coalition between the
CDU/CSU and SPD is forged in H1 2018, the next Bundestag election might result in three or more parties having to form a coalition to secure a stable governing majority.
