A testing time for Germany and Europe

While the results of the German federal election of September 24 appeared done and dusted in the days that followed, following the agreement to push for a Jamaica coalition (so called because the colours of the parties — that of Chancellor Angela Merkel’s CDU, and sister party the CSU, the Greens and the liberal Free Democratic Party (FDP) — match those of the Jamaican flag), many observers warned at the time that the negotiations would prove protracted given the sharp differences in the vision and policies of the parties. An agreement by the end of the year was seen as realistic, highlighting the complexity of the road ahead.

However, the extent of the difficulty surprised many: deadlines proposed by Merkel passed by without agreement and last weekend the FDP announced that a failure to find common ground and a basis of trust between the parties meant that they would no longer participate in the negotiations, throwing the German political system — once the bedrock of predictability in Europe — into uncertain territory.

The worst yet

The political crisis is certainly one of the gravest Merkel has faced in her 12 years in office — a period that has not been short of them. From the Euro Zone issue gripping Europe and tussles over the best way for Europe to respond to Greece’s plight, to the European response to the global refugee crisis, Merkel has faced strong opposition both abroad and domestically, including from within her own party.

After the centre-left SPD under former European Parliament president Martin Schulz announced ahead of the election that they would not participate in another “grand coalition”, Merkel appeared unfazed, swiftly honing in on the Jamaica coalition as the way forward. If it had succeeded it would have been a major political win.

In a world of highly polarised politics, bringing together parties with major differences in their world views and approaches to issues such as immigration and climate change would have been a major boost to those arguing that public support for centre-ground politics devoid of ideology was the way ahead. At a time when differences between political parties elsewhere in Europe couldn’t be more varied, it would have shown that another route was chartable.

Tried before

This is not the first time a Jamaica coalition has been attempted in Germany, though so far it has happened at a regional level: first in the state of Saarland (this fell apart in 2012), and then in Schleswig Holstein this summer.

However, differences that may have elicited a compromise at the regional level have been magnified at the national level, particularly given the pressures from the far right Alternativ Fur Deutschland, which made significant gains in the federal election, winning a 13 per cent share of the vote. The party’s gains have led to an intensification of tensions between the CDU and CSU particularly over the handling of the migration crisis.

A CSU leader once stated that there should never be a political force in Germany to its right, so with the rise of the AfD it has faced heavy political pressure from some within the party to move further rightwards, particularly on immigration.

There are fears that should Germany return to the polls next year, which is a possibility, the right could make even further gains — one factor why some believe all is not lost in the negotiations.

There is currently talk of some sort of alliance with the SPD that could involve backing for a minority Merkel government rather than another ‘grand coalition’, or a return to the Jamaica discussions.

At the same time political parties are approaching the future strategy with caution: Schulz has, in all likelihood, rightly interpreted his party’s dismal performance in the federal election as a sign that people were done with the grand coalition and everything it came to represent, and has therefore remained steadfast in his insistence on remaining in opposition.

Polls have suggested a level of support within the FDP for the party’s decision not to be part of the coalition either, implying that some voted for the party with precisely that in mind. While noting the criticism that the FDP had faced, the business newspaper Handlesblatt noted that others had been impressed with its withdrawal on principle.

“What good would it have done to enter formal talks among four parties who don’t trust one another, and then a governing coalition that cannot agree on fundamentals and could collapse at the first international and unforeseen crisis? Better that Mr (Christian) Lindner hews closely to his party’s classically liberal values,” the paper suggested. Going forward much will depend on the party’s ongoing interpretation of the mandate they were delivered at the polling booths in September.

Markets quiet

For now at least, however, the market reaction has been muted reflecting the health of the German economy. “The economy is in such good shape with 2.5 per cent growth, strong business confidence, full employment and a fiscal surplus that few major decisions need to be taken for the time being. Businesses will not curtail investment growth by much, growth can rumble even in a political limbo,” wrote Berenberg bank’s senior economist Holger Schmiedling.

For others outside Germany it’s almost certainly a blow, particularly for the French president Emmanuel Macron who had counted on German support for his visions for a reformed Euro Zone, replete with a common budget, and a pan-European defence policy.

In Britain a debate is currently under way about what the uncertainty in Germany means for Brexit. While some on the right have suggested it weakens Europe’s hand and presents the ideal opportunity for Britain to lower its offering in the “divorce” negotiations, others argue it simply adds to the already intense time pressures. Whether or not Angela Merkel manages to negotiate a route out of the crisis (and the one thing her handling of repeat crises has highlighted is that her political acumen and calm cannot be underestimated), the recent developments are a powerful reminder that her time in office is limited, and Europe will speedily have to chart a course without its most influential and arguably most steady hand.

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