German Alliance Talks Hit Snag as Parties Differ on Issues

(Bloomberg) -- German Chancellor Angela Merkel’s effort to form a new government hit a snag late Thursday as negotiators diverged on European policy and climate change, highlighting the complexity of the unprecedented multi-party talks.

While Merkel’s Christian Democrats, her CSU Bavarian sister party, the pro-market Free Democratic Party and the Greens committed to a “strong and united Europe,” negotiators remained apart on the euro area and the European Union’s approach to Turkey. The future of Germany’s renewable-energy push also emerged as a stumbling block.

“This is still a difficult component that we have to work out,” Michael Kellner, the Greens’ general secretary, told reporters after a round of talks in Berlin, identifying the issue of bailout policies in the 19-member euro area. “The differences here are great.”

More than a month after an election victory handed Merkel a fourth term while leaving Germany’s political landscape fragmented, party leaders dug in for weeks or months of wrangling over differences on policies affecting the EU, migration and spending. A preliminary pledge this week to maintain a balanced budget gave way to political jockeying over what that would mean.

Read more: Why climate policy is a key issue in Merkel’s coalition talks

After seven hours of talks on Thursday, a two-page draft declared that the parties were committed to the EU’s “joint values” in a globalized world and the “elevated” status of German-French cooperation. The rest of the document consisted mostly of a list of policy areas where the parties have yet to find harmony, including EU-Turkish relations, EU crisis management, the euro-area bailout fund and banking union.

Closing Turkey Gap

The FDP was particularly opposed to moves toward greater euro-area integration at the expense of adhering strictly to fiscal rules, a potential rebuke to measures raised by French President Emmanuel Macron.

“It’s important for us that there is no mutualization of debt, that there are no automatic transfers,” FDP General Secretary Nicola Beer told reporters. Andreas Scheuer, Beer’s counterpart in the Bavarian CSU, said leaders in his party “don’t want a transfer union.”

After an additional four-hour session on climate and energy, the two potential junior partners stuck to divergent priorities. The Greens insisted on a commitment to an “exit from coal,” while the Free Democrats called for less government intervention to steer the power market.

Discussions on Turkey, where Merkel’s faction opposes further EU accession talks, “seem to be on the path toward an agreement, even if we’re coming from different perspectives,” Beer said. No common stance has emerged yet on the U.K.’s exit from the EU.

Negotiators wanted to produce a blueprint on Europe on Tuesday, but moved the discussion to Thursday, when they had been due to discuss climate, energy and migration. That may disrupt a schedule that envisioned an end to exploratory talks by mid-November, after which the parties would enter official coalition talks. Officials aim to wrap up discussion by the end of the year.

“It was a really difficult day, but this is not really surprising because if you put the election programs of the four parties involved side-by-side, it was clear that there would be major differences on the subject of climate and environmental protection and also on the complex issue of immigration policy,” deputy FDP chairwoman Katja Suding said Friday on ZDF television. “We’ll have to work hard to reach an agreement, but I still don’t think it’s impossible.”

Fiscal Discipline

Distrust between the disparate parties came into the open even after Tuesday produced a preliminary pledge toward a balanced budget. The Greens’ Juergen Trittin, once environment minister in the cabinet of ex-Chancellor Gerhard Schroeder, said fiscal discipline wouldn’t be possible if the new government phased out the post-reunification solidarity tax, as the FDP calls for.

The FDP’s Wolfgang Kubicki said the solidarity tax would be abolished completely during the four-year parliamentary term that began this week, which wasn’t specified in the language agreed on Wednesday.

“There’s a lack of basic trust between the negotiating partners,” Kubicki told reporters Thursday. “That’s the condition for them to rely on each other for what people talk about and that there are no varying interpretations.”

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