Germans face snap polls after govt-making talks fail

Following the September 24 German election result, the country appeared to offer something of a haven from the tumult encompassing the rest of Europe. Despite gains by the far right and the centre, left SDP’s refusal to be part of a grand coalition with Angela Merkel’s CDU and partner, CSU, it appeared that a four-way so-called JAMAICA coalition was on the horizon (so called because the colours of the parties matched the colours of the Jamaican flag), with the liberal FDP and the Greens.

Many saw it as an exciting opportunity to find a direction for Europe’s largest economy, at a time other countries were battling issues of intolerance and nationalism.

All that appeared under threat as late on Sunday, the FDP pulled out of coalition talks, eight weeks into them, citing a lack of trust. According to analysis from German media including Der Spiegel, while the issue of immigration and the parties’ stance on family re-unification for refugees was one of the final straws, other issues stood in the way, including relating to carbon emissions, and taxation.

“Although the talks had proved to be very difficult in the last few days already, its failure is still a significant surprise,” wrote Holger Schmieding, chief economist at Berenberg Bank in a note to clients.

The development is arguably the biggest crisis facing Mrs Merkel who has dealt with a number of major challenges since becoming Chancellor in 2005, from the euro zone and Greek economic crisis to Brexit, to the migration crisis, during which her government’s decision to open the border to refugees from Syria left her vulnerable to attacks from the right, and gains by the far right party AfD.

Mrs Merkel’s government will remain as a care taker government alongside its former partner, the SDP until the next steps are charted out, which include a further attempt at the same coalition, another attempt at the Grand Coalition, a minority government led by Mrs. Merkel or even new elections, writes Mr. Schmieding.

“While it remains likely that, one way or the other, Merkel will be able to govern for a fourth term in the end, her position is now potentially at risk.” However, he adds that a new election remains a potentially unpopular option. “Due to Germany’s specific history with the unstable Weimar republic, Germans don’t value minority governments and repeat elections. The pressure on the major parties to form a stable arrangement will be immense in coming days.” The commentators believe the uncertainty will have limited impact on the domestic economy and its wider effects could be far reaching. Several commentators pointed to the fact that it was likely to be a blow for French President Emmanuel Macron who has been pushing for reform of the euro zone, “A caretaker government would only be able to offer symbolic support for Macron,” said economists at Commerzbank.

There were also warnings about the impact that it would have on Brexit negotiations, amid Britain’s tight timetable for leaving in March 2019. Some in Britain sought to position it as positive with Brexit, arguing that with Germany distracted by internal division, it would strengthen Britain’s hand icluding the crucial divorce bill that has so far been standing in the way of progress. Others argued it was a blow for negotiations from Britain’s perspective, acting as a distraction at a crucial time for one of the leading, and most mature voices in the debate. .

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