Merkel Coalition Looks Hard at Options After Key Resignation

(Bloomberg) -- Germany’s two main governing parties will try to pick up the pieces of their rattled coalition on Monday after poor election results triggered the unexpected resignation of one of Chancellor Angela Merkel’s key allies.

The Social Democrats, the junior coalition partner, will begin searching for an interim chief after Andrea Nahles said she lost the support of her party, part of which wants to ditch Merkel’s Christian Democrat-led bloc in hopes of rebuilding voter trust. The chancellor’s CDU will engage in a second day of soul-searching following its own setbacks in last month’s European elections and uncertainty over Merkel’s succession.

Nahles played a key role in forging and keeping alive the so-called grand coalition. Her departure could prompt the SPD’s exit, forcing Merkel to lead a minority government, form an alliance with the pro-market Free Democrats and the Greens, or face an early election. While the administration’s future looks more uncertain than ever, the SPD is 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.”

One potential contender ruled himself out as SPD head on Sunday: Finance Minister Olaf Scholz said on an evening talk show that he isn’t in the running. Malu Dreyer, prime minister of the state of Rhineland-Palatinate, could take over as party leader, with Rolf Muetzenich becoming head of the parliamentary group, both on an interim basis, local media reported Monday.

Michael Roth, a deputy German foreign minister and member of the SPD’s leadership council, said Monday that the European Union needs a “clear, functioning government” in Germany, given pending decisions on top posts like the presidencies of the Commission, the Council and the European Central Bank in coming months.

Main Problem

“I know that many are tired and see the grand coalition as the SPD’s main problem,” Roth said in an interview with DLF radio. The SPD’s continued participation in Germany’s ruling coalition is needed to strengthen social cohesion, make progress on climate protection and make sure the choices for key EU posts are the right ones, he added.

Merkel, the chancellor of Europe’s biggest economy since 2005, signaled she’ll seek to ride out the latest crisis in a shifting political landscape that’s increasingly testing her hold on power.

“We’ll push ahead with the work of our government with a sense of complete seriousness and, crucially, a great sense of responsibility,” she told reporters in Berlin on Sunday.

CDU chairwoman Annegret Kramp-Karrenbauer, known as AKK, said she expected the SPD to decide swiftly on a new leader to avoid hampering the coalition’s work.

Growing Concern

There’s growing concern over AKK’s leadership skills since she 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 poll published Sunday showed most Germans agree with the chancellor.

Merkel’s CDU-led bloc was replaced in the No. 1 spot by the Green Party for the first time in a national survey, polling company Forsa said on Saturday. Support for the Social Democrats dropped 5 percentage points to 12%, just 1 point ahead of the far-right Alternative for Germany.

“We are all responsible, we must all become better. The CDU stands behind its party leader,” Armin Laschet, state premier in North Rhine-Westphalia, said when asked whether AKK was to blame for the party’s poor EU election result. Along with former CDU/CSU caucus chief Friedrich Merz, Laschet is considered a possible replacement for Merkel in case of early elections.

The SPD reluctantly agreed to enter a third alliance with Merkel 14 months ago. In the European Parliament elections in May, its support almost halved to 15.8%. The same day, the SPD lost its traditional stronghold of Bremen, coming in second to Merkel’s CDU in the city-state’s election.

“We expect, as coalition partner, that the leadership question in the SPD will be solved as soon as possible,” CDU Agriculture Minister Julia Kloeckner told reporters Monday. “In the end, it is important that, as coalition partners, we can rely on each other, of course each according to their own profile.”

--With assistance from Zoe Schneeweiss and Tony Czuczka.

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

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Raymond Colitt, Iain Rogers

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