Merkel Coalition Party Leader Quits, Rattling Ruling Bloc

(Bloomberg) -- The leader of German Chancellor Angela Merkel’s junior coalition partner stepped down in a surprise move that puts into question the survival of the government itself.

Andrea Nahles, head of the Social Democratic Party, said she will resign as chief and parliamentary caucus leader after losing the rank and file’s backing. The party suffered a devastating defeat in the European Parliament elections last week. “The necessary support for exercising my duties is no longer there,” she said in an emailed statement.

Nahles played a key role in forging and keeping alive the grand coalition. Her departure could prompt her party’s exit, forcing Merkel to lead a minority government, form an alliance with the Liberals and the Greens, or face a snap election. While the future of the administration looks more uncertain than ever, the SPD is still likely to remain put as it would face a resounding defeat in a new nationwide poll, according to Holger Schmieding, London-based chief economist at Berenberg Bank.

"The temptation of cutting the ties looks beneficial for the SPD but new elections would be a catastrophe for it," said Schmieding by phone. "I expect the SPD under new leadership will remain in the coalition -- if not, it’ll be the end of Merkel as chancellor."

Merkel’s Christian Democrats, which are also steeped in a leadership crisis, are scheduled to discuss later on Sunday their own poor showings in the EU elections. That meeting is now likely to quickly pivot into a discussion over the future of the coalition itself.

As party leaders began arriving for the event, Merkel pledged to continue to push the government’s agenda, while party chief Annegret Kramp-Karrenbauer, or AKK as she is known, said she expected the SPD to decide swiftly on a new leader so as not to affect the coalition.

There has been growing concern over the leadership skills of AKK who succeeded Merkel at the helm of the CDU in December. As Bloomberg reported on May 28, Merkel has decided that AKK is not up to the country’s top job, according to two officials with knowledge of her thinking. A fresh poll on Sunday showed most Germans agree with Merkel.

Her Christian Democrat-led block has been replaced in the No.1 spot by the Green Party for the first time in a national survey, polling company Forsa said on Saturday. The Social Democrats lost 5 points to 12% in that poll, just one point ahead of the far-right Alternative for Germany.

Support Halved

The SPD had only reluctantly agreed to enter a third alliance with Merkel 14 months ago. In the May European election, support for the party nearly halved to 15.8%, while the party lost its traditional stronghold of Bremen, coming in second to Merkel’s CDU.

The SPD choice for a new leader in coming weeks is expected to be linked to a debate about the future of the grand coalition. SPD parliamentary deputy, Karl Lauterbach, called for an interim leadership so to avoid any rush decision. Based on tradition, the most senior of the party leadership would succeed Nahles on an interim basis. In the case of party chief that would Malu Dreyer, and for caucus leader, Rolf Muetzenich.

"The party is split, there are many members who want to leave and many who want to stay," Ingrid Arndt-Brauer, a lower house SPD lawmaker who sits on the finance committee, said in a phone interview. "The decision on that should not be rushed."

--With assistance from Zoe Schneeweiss.

To contact the reporters on this story: Birgit Jennen in Berlin at bjennen1@bloomberg.net;Arne Delfs in Berlin at adelfs@bloomberg.net;Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editors responsible for this story: Erhard Krasny at ekrasny@bloomberg.net, ;Flavia Krause-Jackson at fjackson@bloomberg.net, Raymond Colitt, James Amott

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