Merkel's Would-Be Ally Says No to `Pots of Money' for Macron

(Bloomberg) -- Germany’s next government will be tougher on granting fiscal leeway to Greece, France and other euro-area countries if it includes the Free Democrats, a traditional ally of Chancellor Angela Merkel’s party, their chairman said.

Christian Lindner, 38, is seeking to lead the pro-market FDP back into parliament after a four-year absence, returning to the Bundestag a party that opposed bailouts for Greece and says Germany has to draw lines in the sand with French President Emmanuel Macron. France and Germany won’t solve the European Union’s problems by running up debt, Lindner said in a Bloomberg Television interview.

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“My impression is that Mrs. Merkel has already agreed with Mr. Macron to set up new money pots and transfers in Europe for the time after our election,” he said. In contrast, the FDP insists that “euro countries must be responsible for their own fiscal policy.”

While the FDP has ideological affinities with Merkel’s Christian Democrat-led bloc, Lindner said policy differences are wider than in the past and a hookup isn’t a foregone conclusion if the numbers add up in the election on Sept. 24.

With Merkel steady as front-runner, the FDP rose 1 percentage point to 10 percent in a weekly FG Wahlen poll published Friday. Merkel’s bloc held at 39 percent and their combined support would probably suffice to form a government, which would be a repeat of Merkel’s second-term coalition.

All other major parties were unchanged except the anti-immigration Alternative for Germany, which declined 1 point to 8 percent. More evidence that voters are warming to the idea of a coalition between Merkel’s and Lindner’s parties came in an Infratest Dimap poll showing 43 percent in favor of Merkel governing with the FDP, 7 points more than in April and just 1 point behind those who favor a repeat of the grand coalition between the CDU/CSU and the Social Democrats.

While markets welcomed Merkel’s coalition with the FDP in 2009, there may be greater potential for friction this time. In the wake of Brexit, Merkel and Finance Minister Wolfgang Schaeuble are campaigning for further integration of the euro area, led by a Franco-German alliance. The question is where that path leads, Lindner said.

Merkel's Would-Be Ally Says No to `Pots of Money' for Macron

“We have too little competitiveness in the euro zone,” Lindner said. “The general view is that more public investment needs to be mobilized, but we have enough money for that. The problem is the order of the markets, the lack of flexibility, the over-bureaucratization in many places.”

“Eurobonds, new pots of money, that doesn’t make any sense,” he said. “If there is a lack of investment, then you can think about it, but if you take on new debt together for consumption, that would overstretch solidarity in the euro zone.”

Let Greece Go

Another source of conflict would be the FDP’s insistence that debt forgiveness for Greece would be linked to the country’s leaving the currency union while staying an EU member, an idea Merkel has flatly refused to keep the euro area together.

“If there was a debt cut for Greece, as the International Monetary Fund suggests, then we should be open-minded to finally solving the problem,” Lindner said. “Greece gets a debt cut, the money is gone, but for that Greece has to leave the euro zone, gets a new currency of its own which it can devalue and increase its competitiveness in tourism.”

The FDP took a record 14.6 percent of the vote in 2009 and joined Merkel’s bloc to form a government, only to crash out of the Bundestag four years later after failing to impose its tax-cut agenda and fighting over bailouts for Greece. This time, the FDP is calling for a 30 billion-euro ($36 billion) tax cut, twice the amount floated by Merkel and Schaeuble.

Finance Minister

As Germany’s smaller mainstream parties stake out positions for coalition talks that are likely to follow the election, Lindner said Europe’s biggest economy may well wind up with a rerun of Merkel’s coalition with the SPD.

A three-way Merkel government with the Free Democrats and the Green party would be so disparate that it’s “not a realistic goal,” the FDP head said.

He still hinted at his party’s ambitions to take a key post in government. While refusing to discuss possible cabinet appointments as premature, he conceded: “Of course it was a mistake not to take the Finance Ministry in 2009.”