German SPD Sets Out Demands for Staying in Merkel’s Government

(Bloomberg) -- Germany’s Social Democrats laid out a list of demands to remain in Chancellor Angela Merkel’s government, but stopped short of threatening an immediate exit.

SPD leaders said they want a “massive” increase in infrastructure spending, a higher minimum wage and more aggressive measures to tackle climate change. The demands were set out by the party’s newly-elected leaders on Thursday and will be put to a vote at a party convention in Berlin beginning Friday.

Bunds extended losses after the party’s call for large-scale spending increases, with the 10-year yields climbing 2bps.

“We have always said that quitting the coalition is not an end in itself,” Norbert Walter-Borjans, who was elected co-chief of the party last weekend, told reporters in Berlin.

“But nobody can expect a decision tomorrow to remain in a coalition about which there are many open questions and questions that need to be resolved,” he added. “It’s about content and not about the question of yes or no.”

Despite some back-peddling by the SPD, its negotiations with Merkel’s bloc won’t be easy. Reopening the debate over a climate package that took months to secure will find little support from the CDU and its Bavarian sister party, the CSU. Equally, an increased minimum wage -- which the SPD wants set at 12 euros ($13) an hour -- could become a major bone of contention.

The future of Merkel’s government was thrown into doubt when Walter-Borjans and his running mate Saskia Esken won an SPD leadership contest against a tandem led by coalition loyalist Olaf Scholz, Merkel’s finance minister and vice chancellor.

While the willingness to engage with Merkel’s bloc offers the government a lifeline, the SPD remains a reluctant ally. But ending the coalition could lead to a snap election, a risky bet for a party whose support has slumped to about 15% in recent polls, roughly level with the far-right AfD.

©2019 Bloomberg L.P.