Germany’s Next Coalition Nears Deal on Legalizing Cannabis

(Bloomberg) -- Germany’s likely next ruling coalition is closing in on a deal to legalize cannabis for recreational use, the strongest signal yet that long-awaited growth of Europe’s marijuana market is gaining traction.

Negotiators for the Social Democrats, Greens and pro-business Free Democrats are hammering out the details, including conditions under which the sale and use of recreational cannabis would be allowed and regulated, according to people familiar with the talks, who asked not to be identified because the discussions are private.

They’re part of wider negotiations on forming a new government, with the three parties targeting early December for a new administration to take office under Social Democrat Olaf Scholz.

No final decision on cannabis has been made and the outcome could still change, the people said. Spokespeople for the Greens and SPD declined to comment on any aspect of the coalition talks. A spokesperson for the FDP didn’t immediately respond to a request for comment on the cannabis plan.

An agreement on its legalization wouldn’t be overly surprising. The likely coalition partners have been more open to the idea than Angela Merkel’s Christian Democrats, who have been in power since 2005.

The move would give a boost to a European market that is projected to be worth 3.2 billion euros ($3.7 billion) by 2025, up from 403 million euros at the end of this year, according to the European Cannabis Report by research firm Prohibition Partners.

The step could bring in fresh tax revenue and be a boon for U.S. and Canadian cannabis firms as well as a nascent German industry that includes firms such as Cantourage GmbH and Synbiotic SE.

Many cannabis growers already have a foot in Europe’s door through medical businesses and have been positioning themselves to benefit from a bigger recreational market. Curaleaf Holdings Inc., the U.S.’s largest multistate operator, earlier this year bought Emmac Life Sciences Ltd., poising it to capitalize. Curaleaf Chairman Boris Jordan also has a stake in Frankfurt-based startup Algea Care.

Tilray Inc. has a facility in Portugal that it says aims to ship marijuana across Europe, and it has been touting its merger with U.S. company Aphria Inc. Other Canadian operators, such as Aurora Cannabis Inc. and Canopy Growth Corp., also currently serve the German medical market.

The United Nations late last year decided to remove cannabis from its list of hard drugs, followed by the European Commission’s categorization of cannabidiol, an active ingredient derived from the hemp plant, as food rather than narcotic.

Public opinion in Germany has also shifted toward legalization. In a survey at the end of October by the German Hemp Association, 49% of respondents said they were in favor of legalizing cannabis, for example in specialty shops as in the U.S. and Canada, compared with 46% who were still opposed. That’s the first time since 2014 that more people were in favor in the annual poll.

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