Late last week, the German President, Frank-Walter Steinmeier, pressured SPD leader Martin Schulz to have coalition talks with CDU/CSU leader Angela Merkel.

Steinmeier's goal is to prevent another round of German elections after the FDP unexpectedly walked out of coalition talks.

Pressure is On

The Washington Post reports Germany’s Merkel faces pressure for quick coalition talks.

Reuters says Merkel points to grand coalition with Social Democrats.

Talk is Cheap

Eurointelligence sums things up nicely.

Martin Schulz had a meeting with President Frank-Walter Steinmeier yesterday, who predictably asked him to engage in talks with the CDU/CSU. Schulz will comply, of course, as there is no reason not to talk. We have no doubt that CDU/CSU and SPD will find a long list of policy issues on which they can agree. The SPD will almost certainly negotiate tougher than it did before. It will try to table policies which it knows will open wounds within the CDU/CSU, for example on Europe and on the right of refugees to be joined by family members.The reason why is Berlin is in political gridlock is the country is divided. No grand coalition will change that. In our view, a grand coalition - if it happens - will lead to a further political erosion of the centre. The latest poll has CDU/CSU and SPD at a combined support of under 50%. We are not far from the point of no return, where the two parties will no longer be able to form a coalition between each other - let alone a "grand" coalition. They will then need the Greens or the FDP, and we are back to square one.

Key Problems

  1. Merkel is not in a position of strength. SPD will demand concessions that Merkel is unlikely to accept. Her sister party, CSU, may walk out if she does.
  2. AfD will be the largest opposition party, with parliamentary rights. No one wants that outcome other than AfD.

There will be talk. Just don't expect anything from it. Eurointelligence sees these possibilities:

  1. SPD and CDU/CSU fail to agree on a common agenda. No minority government, no grand coalition. New elections.
  2. SPD and CDU/CSU leadership make progress in talks, but SPD leadership refuses grand coalition, agreeing only limited support for a time-limited minority government. Merkel sees the trap (being pushed into the hands of the AfD), refuses, and tells the president that she is unable to form a government. New elections.
  3. SPD and CDU/CSU make progress, SPD leadership decides to enter formal coalition talks, but compromises on key issues. SPD membership votes against grand coalition in a referendum of party members.
  4. Merkel is so desperate to hang on to power that she gives SPD everything they want. Grand coalition goes ahead. Schulz is finance minister, effectively runs the eurozone agenda. AfD and FDP skyrocket in the polls. CSU loses Bavarian election in 2018. Conservatives in the CDU, led by Jens Spahn, revolt. Merkel leaves, Coalition breaks up.

Minority Government

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Merkel has dismissed forming a minority government, but she is a known liar and political opportunist.

After all, that is precisely how we got to this junction in the first place.

Udo di Fabio, the Antonin Scalia of German constitutional law, and a former justice in the constitutional court discussed the setup in Handelsblatt.

Fabio says that financial and political crises have strengthened the power of the chancellor beyond anything ever envisaged in the constitution.

  1. Merkel overnight changed Germany's energy policy in response to an accident in another part of the world.
  2. She drew up a rescue umbrella for the eurozone.
  3. She opened the refugee floodgates.

Less Merkel

The Greens and SPD want more immigration and more Europe.

CSU, FDP, and AfD want immigration controls.

FDP and the Greens strongly disagree on energy policy and Immigration.

SPD and the Greens would be happy with Eurozone budget commingling, but CDU/CSU, FDP, and AfD would not.

AfD and FDP are fed up with Merkel's power grab, her energy hypocrisy, and "more Europe" in general.

Another "Grand Coalition" if it forms at all, will quickly splinter into oblivion.

Expect "Less Merkel" and "Less Europe" in any scenario.

Mike "Mish" Shedlock

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