DO NOT EXPECT A MERKEL WIN TO BE EUROPE´S GAME CHANGER / THE FINANCIAL TIMES COMMENT & ANALYSIS

August 25, 2013 4:29 pm

 

Do not expect a Merkel win to be Europe’s game changer

 

By Quentin Peel

 

The next government’s policies will not be very different to the present ones, writes Quentin Peel

 

©Matt Kenyon

 

Seldom has a German general election attracted so much international attention. The world is watching and waiting for the outcome – with waiting being the operative word.

 

In Europe, especially, all sorts of decisions – from finalising a eurozone banking union to debating debt relief for Greece – seem to have been delayed until the political make-up of the next government in Berlin is clear.

One assumption is that, if Angela Merkel is re-elected as chancellor, she will be liberated to become more generous towards her eurozone partners. Another is that she will be forced into a grand coalition with the opposition Social Democrat party (SPD), with much the same effect.

Both may be wrong. For, in spite of her popularity, Ms Merkel may end up with less room for manoeuvre after September 22 than she has now.

On the face of it, the election seems unlikely to spring any nasty surprises. The opinion polls have been flatlining for months, and the mood in the country is not in favour of change.

That is precisely why Ms Merkel is so popular – with a 63 per cent approval rating, according to one recent poll, compared with 29 per cent for Peer Steinbrück, her SPD rival. The chancellor is reassuringly predictable.

 

If she were running for office in Britain or US, she would be pretty well home and dry. In Germany, however, they will be electing a coalition – and no one is quite sure who her governing partner will be.

Ms Merkel may end up with a wafer-thin majority in the Bundestag with her current ally, the liberal Free Democratic party. But she would still have to negotiate constant compromises with the SPD-Green majority in the Bundesrat, the upper house where the 16 federal states are represented.

If there is no such “black-yellow” centre-right majority in the Bundestag, she will have to negotiate with the SPD or the Greens to form a government. A coalition with either would be mathematically possible but politically difficult. They are instinctive rivals of Ms Merkel’s Christian Democrats (CDU). On European policy, however, they largely agree.

The chances of a non-Merkel government are Slim: the SPD and Greens would have to rely on support from the far-left Linke party to have a majority. Both know that a “red-red-green” alliance would be highly unpopular.

The most likely solution, therefore, and the most popular – 51 per cent of voters say they favour it – would be for a grand coalition of CDU and SPD, just like the one Ms Merkel led from 2005 to 2009. The only trouble is that SPD members hate the idea. That is where the uncertainty lies.

Presidents François Hollande of France and Barack Obama of the US believe a grand coalition would guarantee more growth. They should not count on it. For all the sound and fury of the election campaign, the next government will not be very different from the present one as far as economic policy is concerned. Ms Merkel’s mantra of “solidarity in exchange for solidity” – meaning that Berlin will stand by its eurozone partners, but only if they “put their own houses in order” – will remain at the heart of German policy.

The CDU and SPD back the “debt brake” that requires a balanced budget from both federal and regional governments. They have forced it on to their eurozone partners, too.

As for eurozone crisis management, there is little real difference between them. As a senior SPD official puts it: “We both want to stabilise the euro and the eurozone, but the SPD is a bit more honest about what that will cost.”

On the other hand, the SPD is adamant that the European Stability Mechanism – the €500bn eurozone bailout fund – cannot be used for direct recapitalisation of ailing banks, as France, Spain and Italy would like. The party says that the banking sector, not taxpayers, must fund any such recapitalisation.

Very little of this has been debated in the election campaign so far. The SPD knows it cannot win votes by bashing Ms Merkel on her eurozone policy, because her balancing act of being pro-European while defending the national interest is what the voters want.

That could change after the admission last week by Wolfgang Schäuble, finance minister, that Greece will need another rescue programme next year. He may have been more forthright than he intended, or he may have wanted to prevent anyone accusing him and Ms Merkel of an “election lie”. But the issue is up and running.

 

Bailing Greece out again is unpopular. The mass circulation Bild newspaper is running a campaign to get all the political parties to commit themselves to “no more money for the Greeks”.

The only party that is likely to help is the tiny, newly founded Alternative für Deutschland, which wants to dissolve the euro and force debtor countries such as Greece to leave.

Until now, the AfD has failed to get more than 3 per cent in the opinion polls. But if it were to get more than 5 per cent – and therefore seats in parliament – it would probably make a grand coalition unavoidable for both CDU and SPD.

One way or another, Ms Merkel will still be in charge. But she will either have a tiny majority with the FDP, leaving her far more hostage to rebels in her own party ranks; or she will end up sharing power with a truculent partner in a grand coalition looking for every opportunity to precipitate a new election. It will not make Germany any easier to live with.

 

Copyright The Financial Times Limited 2013