On why the German EU positions will change after the German General Elections

A recent FT article points out that the electoral campaign positioning has already started. And it has the Social Democrats in bed with the Green Party to an unusual degree. The way the Greens and the SPD are talking makes me believe it would be difficult to form a Grand Coalition between Angela Merkel’s Christian Union parties (CDU/CSU) and the SPD, if it were to come to this. On EU policy, this matters.

Around the time of the Cypriot bank crisis, I put together some thoughts on German politics and the saver’s tax in Cyprus and the gist of the post there was that, externally, the SPD and the CDU/CSU, the main German parties, had pretty similar ideas about bailouts and the Euro. In fact, it was the hard line of the SPD which assured a hard line from Merkel because there was no way she could offer a bailout negotiating stance softer than the rival party if she wanted to use her success in preventing German money from being used for bailouts as an electoral talking point.

On the coalition possibilities, I had this to say:

“The present ruling coalition in Germany is made up of the CDU/CSU/FDP parties that led Germany under Helmut Kohl, with both finance minister Wolfgang Schaeuble and Chancellor Angela Merkel being prominent members of the Kohl era government. Here’s the thing though; the FDP have increasingly lost voters in Germany and are in jeopardy of falling under the 5% hurdle that defines whether a party can even be represented in the German Bundestag. Despite Angela Merkel’s popularity it is not clear the present coalition could form a government after this year’s general election. There are three main possibilities outside of the present coalition then: a grand coalition between SPD and CDU/CSU, a CDU/CSU/Green Party government or an SPD/Green/Linke coalition.”

Now, I have been following the electoral tracking polls in Germany and what is relevant here is that the FDP do look in jeopardy of missing the 5% hurdle. That would leave the right of center CDU/CSU ruling parties alone at the top, forcing them to form a coalition with either the left of center SPD or the further left of center Green party. The latest Emnid poll puts the voting as follows: CDU/CSU: 40%, SPD: 27%, FDP: 4%, Linke: 7%, Greens: 14%, Pirates: 3%, Alternative für Deutschland: 2%, Others: 3%. The only parties that make the 5% hurdle here are the Union, SPD, Linke and Greens. If this were to hold, then these would be the only parties available to form a coalition. The Union would get first crack at forming a government as the party with the largest percentage of votes. But if they could not form a government with the SPD, Greens or Linke, then the SPD could create a coalition. Here’s where the FT article comes into play. It is appropriately titled, “Greens and SPD close ranks in battle against Angela Merkel“:

Germany’s main centre-left opposition parties closed ranks over the weekend in their uphill battle against Angela Merkel, with the Greens signalling a decisive shift to the left.

During a three-day party congress in Berlin five months before national elections, the Greens positioned themselves to the left of the Social Democrats (SPD) with calls for higher income tax and a property levy on the rich.

The party pledged to raise the top rate of income tax from 45 to 49 per cent, and to levy a 1.5 per cent tax on property worth more than €1m, aiming to raise €100bn over 10 years.

Making the first appearance by a Social Democrat leader at a Green congress, Sigmar Gabriel, the party’s national chairman, delivered a passionate plea to the Greens to stop flirting with Ms Merkel’s conservatives. He said only an SPD-Green coalition could take on the financial markets, which he blamed for the recent economic turmoil in Europe.

“There are only two parties in Germany that can tame the financial markets, and that’s you and us,” he told delegates, to loud cheers.

Jürgen Trittin, the Green’s parliamentary leader, declared: “The SPD is the only coalition partner that will help us make Germany greener.”

Explicitly distancing himself from previous talk of keeping options open for a coalition with the CDU, Mr Trittin added: “We are not going to form a coalition with a band of corrupt amigos like that,” referring to tax evasion and corruption scandals that have battered the ruling coalition in recent weeks. Green leader Claudia Roth spoke at the SPD’s convention two weeks ago.

My takeaway here is that the SPD and Greens are indeed closing ranks and they are essentially campaigning as a duo. In Germany, one votes for two parties in the general election, a preferred party and a second party as well, called the second vote or Zweitstimme. The Zweitstimme is important for voting in terms of allocating seats in the Parliament, the German Bundestag. And my takeaway from the partnership electioneering here is that the SPD are trying to increase the Green/SPD seat allocation enough to clear a 50% majority of seats without having to rely on the Linke party, an amalgam of former communists and breakaway SPD politicians. What the SPD are doing is putting all their eggs into the Greens basket, even appearing at the Greens party congress. That kind of electioneering is unprecedented.

This rules out a grand coalition as a first choice option in my view. It also rules out the CDU/CSU-Greens link up as a first choice option as well. It basically puts the Union in the position of NOT being able to form a government unless they can get the FDP well over the 5% hurdle, which I don’t think they can do. And the Union is not going to form a coalition with the Linke party either. In essence, the SPD-Green electoral strategy makes the SPD the frontrunner in this year’s German election. And this is all because the FDP has become so weak.

The bottom line is this: Neither the SPD nor the Greens want to form a government with the CDU/CSU. And that makes the CDU/CSU parties dependent on the FDP to form a government. But the FDP are so weak that they may not even get represented in the Bundestag. Even were the FDP to make the 5% hurdle, the combined percentage of votes they would garner would leave them short of a ruling coalition majority. This puts the SPD in the best position to form a government in my opinion. They are now saying they only want the Greens. And they and the Greens are electioneering as if that were the case. The point is to increase their Zweitstimmen percentage in order to clear an absolute majority without the Linke party.

If the SPD and Greens do get a 50% majority of seats, they will form a government. Only if they do not, is a Grand Coalition of SPD and Union possible – and then only because the SPD refuse to form a government with the Linke. Angela Merkel is not likely to be Chancellor given this turn of events – even with her own personal popularity high. The SPD’s Peer Steinbrück is in a better position than she is. And Steinbrück is saying something different than Merkel on EU policy. The SPD want growth over austerity aka back-loaded austerity. They might even be open to ditching austerity altogether in all but name, depending upon the circumstances. Even in a grand coalition, what the SPD want will matter greatly. Thus, come September, Germany’s position on EU matters around austerity and growth is bound to change dramatically.