Merkel Faces Volatile Coalition Options If Election Goes Her Way

(Bloomberg) -- Angela Merkel’s poll lead in Germany’s election campaign is so wide that interviewers already are asking her to preview the next government. While the chancellor persistently avoids the question, the range of possible ruling coalitions after the Sept. 24 vote is likely to be the broadest yet.

With Merkel’s Christian Democratic Union-led bloc ahead and Martin Schulz’s Social Democrats polling second, the wide-open race for third place is “the most exciting feature” and could have a key influence on German policy toward Europe, ING-Diba economist Carsten Brzeski said in a note.

“All potential coalitions have their pitfalls and would be more difficult to push through than before,” partly because two of the three possible partners are already “traumatized” by serving in Merkel-led governments, said Oskar Niedermayer, a political scientist at Berlin’s Free University, who has researched German parties since the 1970s. Here’s a look at the main scenarios if Merkel wins a mandate for a fourth term:

Merkel and the FDP

An alliance with the Free Democratic Party is the option to bet on if the election result allows it, according to Niedermayer, though coalition talks would be difficult. “The FDP would have to do everything to drive up the political price,” Niedermayer said. The pro-market party is scarred by its run as Merkel’s second-term partner, when it failed to impose its tax-cut agenda and dropped out of parliament in the next election in 2013. Its reluctance to sharing risks in the euro area clashes with Merkel’s consistent support for keeping the currency union whole.

For an interactive guide to possible German coalitions, click here.

Merkel and the Greens

Untested at the national level, though Merkel’s CDU and the environmentalist party govern together in two German states, including a Green-led coalition in Baden-Wuerttemberg, home of Daimler AG and Porsche. A hookup with the CDU and its Bavarian sister party, the Christian Social Union, would have to overcome resistance from Green left-wingers.

‘Jamaica’

A CDU-CSU coalition with the FDP and Greens comes into play if neither of the two smaller parties wins enough parliamentary seats to serve as coalition partner on its own. Colloquially named after the Caribbean island for the combination of party colors, this option would be “really, really difficult,” Niedermayer said. “The Greens’ left wing will try all kinds of things to prevent this alliance. Many Green core voters feel even more distant from the FDP than from the CSU.” It might work if Green and FDP leaders bridge a policy gap on green-energy taxes, said Holger Schmieding, chief economist at Berenberg Bank. Heading Germany’s broadest coalition yet would jibe with Merkel’s consensus-building style of government, he said in an interview.

Last Exit: Grand Coalition

If all else fails, Merkel’s bloc and the SPD could try to extend the “grand coalition” of the two biggest parties that’s running Germany now. This time would be more fraught. While the Social Democrats could balk and force a repeat of the election or a minority government, “Germans don’t like either of those options” and would blame the SPD, Niedermayer said. “This could tear the SPD apart.” Merkel has been here before: after her 2013 election victory, the Social Democrats ratified participation in her third-term government only after a membership vote. This year, SPD leaders insist they don’t want another grand coalition.

Avoiding Commitment

Merkel has ruled out the anti-capitalist Left party and the nationalist, anti-immigration Alternative for Germany as future partners. Beyond that, she’s leaving her options open. “There are no natural coalitions,” she said in a German television interview on Aug. 14. “Everybody is first and foremost fighting for themselves.”

--With assistance from Birgit Jennen

To contact the reporter on this story: Arne Delfs in Berlin at adelfs@bloomberg.net.

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net, Brian Swint, Tony Czuczka