Merkel’s Partner Wants to Forget Talk of Ditching Coalition

(Bloomberg) -- Talk of bringing down Chancellor Angela Merkel’s government or demanding huge concessions has all but evaporated as Germany’s Social Democrats gathered for another round of coalition talks.

Back in December, the party’s newly-elected leftist leaders, Saskia Esken and Norbert Walter-Borjans, were still threatening to withdraw from the coalition unless Merkel agreed to massive investments, a sizable minimum wage boost and other spending projects.

But when party chiefs met for coalition talks Wednesday night, it was mostly about minor adjustments not major shifts in economic policy. Instead of the 450 billion euros ($495 billion) in investment that the SPD leaders had demanded, the debate is now focused on how best to use a 13 billion euro surplus from last year’s budget.

The meeting of Merkel’s coalition partners ended after more than six hours early Thursday without big advances. The Social Democrats and the chancellor’s CDU-led conservatives only agreed to increase aid for unemployed workers in Germany’s embattled car industry, mandating that jobless benefits run for a full two years, according to an emailed statement.

The partners also agreed to put 1 billion euros toward support for the country’s farmers over the next four years, while failing to come to terms on larger issues such as a minimum pension and a corporate tax reform.

Behind the SPD’s backpedaling essentially is a party that’s too weak to really make any demands. Lingering at near-record lows in the polls, it would lose around a third of its force in parliament were it to trigger snap elections. So both sides have softened their stance, according to party officials who asked not to be named.

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Kevin Kuehnert, the SPD’s rabble-rousing youth leader whose support helped enable the election of Esken and Walter-Borjans, is no longer pushing for a breakup, according to a person with knowledge of his thinking who asked not to be named.

Merkel’s Christian Democrats know they could ride out the rest of her term with a minority government. But the chancellor is keen to keep the SPD on board and aware of the need to give its leaders something to show for at their next party convention, according to senior lawmakers in her party.

Merkel’s Partner Wants to Forget Talk of Ditching Coalition

Also, with a record budget surplus last year and government projections on Wednesday expected to show marginally improving economic growth, there’s slightly more fiscal room to maneuver.

Earlier in the week Esken said she will continue to push for substantial investments and wanted to discuss ways of strengthening collective labor negotiations as a way to improve working conditions. She toned down earlier demands for a minimum wage of 12 euros per hour, saying there should be “some progress“ toward that goal.

On the eve of the meeting, Merkel sought to reassure the SPD, saying that one way or another the government would adopt a basic retirement pay, a demand very dear to the party.

“You don’t have to worry. There’s still some need for discussion, but there’s no doubt that the minimum pension will come,” she said.

The CDU, meanwhile is push for a small-scale corporate tax cut proposed by Economy Minister Peter Altmaier.

“All parties should have some fun in this coalition, we will therefore fight for a corporate tax reform,” caucus leader Ralph Brinkhaus said on Tuesday.

While the SPD could go along with such a proposal it would want to see something in return. In addition, the party has yet to consult its wider leadership next month on key policy proposals. All that will take time.

©2020 Bloomberg L.P.

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