Germany may have a stable and more cooperative government

Chancellor Angela Merkel said, Germany and France are “ready and willing” to take a proactive stance and address the challenges of the 21st century together. The Chancellor was on official visit in France for three days during 19 – 21 January 2018, to mark the 55th anniversary of the signing of the Elysée Treaty between the two nations. Photo: Bundesregierung/Bergmann.

The center right and center left German mainstream political parties agreed yesterday evening to form a new grand coalition government. It will be the third time since 2005 the two Christian parties and the socialists jointly govern their country. The socialists will control the Finance, Foreign and Labor ministries, with Martin Schulz, the Social Democratic Party ( SPD) leader in the Foreign desk.

The final text of the agreement though has to be approved by the majority of the 450,000 members of SPD. Can they say ‘no’? Yes they can, but they would rather say yes. Their average age is 60 years old, and as Germans being fairly conservative people they will opt for stability. The party’s youth organization Jusos opposes the agreement (NoGroKo), but its weight is very low in the party membership. Schulz said this time the coalition will have a much stronger Socialist imprint.

So, during the next three and a half years the Germans may see some change in the way the country is managed. This can be a departure from the hazy overlapping of political colors and ideologies of the past. If this won’t be the case, boredom and a few other things like immigration, may induce voters to penalize all three grand coalition parties in the next general election of 2021 and even sooner than that in regional and local votes.

However, Chancellor Angela Merkel’s extra zest to put together another grand coalition government with the social democrats was probably a bit farfetched. She is at the helm of Germany for twelve years and five months now. Her appetite for another term in the Chancellery has provoked a rather noticeable wave of carping, within and without her own party the Christian Democratic Union, CDU and its sister Bavarian party the Christian Social Union, CSU.

Merkel’s zest for cooperation

Objections to Merkel’s enthusiasm for a new grand coalition became louder after last Monday she vowed “being ready for painful compromises”. However, she didn’t mean ‘painful’ only for the side of Christian parties, but possibly more so for SPD. Whatever the final compromise between the Christians and the Socialists, the real test will be the next three and a half years during which the grand coalition government has to prove it was formed for the good of the majority of  Germans.

One month ago on 11 January, this newspaper published a lead story entitled “What will Germany look like after the next election?” It concluded as follows, “the cooperation of the center-left with the center-right parties, proved politically more detrimental for the former; the political developments in Europe for the last twenty years have witnessed the endorsement by the left leaning parties of neoliberal policies. At the same time, anti-labor laws, pro-financial markets measures and income inequality increasing policies have opened the way to harlequin and extreme right wing populists.” True, the collaboration between the mainstream conservative and socialist political forces have cost dearly to both. Last September, electoral results though proved the SPD socialists paid a dearer price. Before them, during the past thirty years it was the British, Swedish, Greek, Spanish and other center-left parties who paid the price for cooperating with the conservatives or for adopting neoliberal policies.

Avoiding further fall

For this reason, Martin Schulz, the leader of SPD, wants to avoid further downfall of his historic party. To do that he has focused his negotiation efforts to reverse what has been the 2006-2007 turning point in deregulating Germany’s labor market; the ‘mini jobs’. For ten years the German employers use this breakthrough legislation to employ mainly but not only low qualification workers with short term repeatedly renewable contracts, paying them poorly and practically leaving them without social insurance coverage. Merkel didn’t agree to abolish this legislation, but was forced to accept limits to the renewals of the short term employment contracts.

The SPD has also insisted in changing Germany’s long established fiscal and incomes austere ideology, not only for the country proper but for the rest of the EU as well. Schulz in a Twitter said the two sides agreed on “more investment, an investment budget for the euro zone and an end of forced austerity!” This will be a major change, after Wolfgang Schäuble – the architect of Germany’s austere strategy – was removed for the key ministry of Finance. He was recently elected in the largely ceremonial position of the Speaker of Bundestag, the federal parliament.

More socially equitable policies

There is also information that the Christians and the Socialists agreed to work towards socially fairer taxation of corporate profits in the entire European Union. It was revealed they will seek “a better and fairer Europe”. This last change of policy line in Berlin will be highly appreciated in Paris. The French President Emmanuel Macron has only just proposed a ground breaking reform of the European Union. He has recommended more fiscal and financial risk sharing between the euro area member states. Germany and France constitute the backbone of the single money Eurozone of 19 EU member states.

Macron has gone as far as to propose the institutionalization in Brussels of a European Finance ministry, a body which in difficult times may mean fiscal collaboration between member states. Obviously, this step will imply more burdens for the German taxpayers, if this intergovernmental cooperation includes trans-national financial backing.

More EU solidarity

To be noted, the 12 January initial grand coalition memorandum between Merkel and Schulz, foreseeing the broad lines for a joint government, includes a passage providing for extended powers and responsibilities for the European Stability Mechanism of Eurozone. This is a tool to bailout euro area governments and contains elements of financial risk sharing between the 19 member states of the euro area. Undoubtedly, more risk sharing in the euro area means bigger financial responsibilities for the Germans and more support for the deficitary countries. This may constitute a turning point in the history of EU, introducing the element of real solidarity among member states. The fate of Greece for example would have been quite different under such conditions.

If all that materializes, Schulz and his Socialists must have really cornered Chancellor Merkel and her Christians. Not to forget, the SPD leadership has to soon pass the agreement in a vote by all the 450,000 party members. Without some major wins for Schulz, the agreement could be blown to pieces. Finally, it remains to be seen how the two sides are to coincide in re-balancing the country’s healthcare system, between the public and the private sector. In any case, Germany is to have a sound and stable government for the next three and a half years, but there will be political cost for that.