Germany: Confidence and supply?

A minority government led by Angela Merkel is looking increasingly likely in Germany.

In my 20 November article I outlined four possible ways forward in Germany following the collapse of the 'Jamaica' coalition negotiations at the weekend. The two to which I attached the greater probabilities were fresh elections or a CDU/CSU/Green minority government.

Following her meeting with German President Frank-Walter Steinmeier (pictured) that afternoon, CDU leader and German Chancellor Angela Merkel intimated that she personally leant towards a snap poll. However, it appears that Mr Steinmeier, supported by at least some members of the SPD, has persuaded SPD leader Martin Schulz to consider supporting a Merkel-led minority government. Indeed, some SPD lawmakers have gone further and said that the party should go back on its previous ruling out of a grand coalition, albeit only as a last resort. Although I certainly would not rule this out, my personal view remains that the SPD is more likely to agree to support a minority coalition on key issues from outside government, ie a variation on what is known generically as a 'confidence and supply' agreement.

Mr Schulz is due to meet the German President (who was himself a leading member of the SPD until he assumed the presidency) today.

If a minority government were to come about, with the Greens inside the formal coalition and the support of the SPD essential for its survival, we would almost certainly see the most left-leaning and fiscally 'loose' German administration since Mrs Merkel first won power in 2005. The SPD would almost certainly insist on significant boosts to pensions and healthcare spending for starters; and it would likely be very supportive of the Greens' policies on energy in particular. Government spending would still, I assume, be restrained by Germany's balanced budget law; but a fiscal surplus forecast to be around EUR16bn this year and scope for similar additional spending next should leave plenty of room for manoeuvre. Furthermore, and also in common with the Greens, to guarantee its continuing support, the SPD would push Mrs Merkel on EU reform and integration consistent with French President Emmanuel Macron's ambitious proposals. In short, a minority government would inevitably be committed to policies which would be significantly different to those to which a Jamaica coalition would have been bound.

At least some of this would be hard to swallow for right-wingers in Mrs Merkel's CDU and probably even more so by its Bavarian sister party, the CSU. But there appears to be a growing mood in the ranks of the CDU at least that a minority government would be preferable to another election. Nevertheless, assuming that agreement is reached to try for this (as I think it will), I expect that concluding a deal with the SPD on such would still take some time and quite possibly into early next year.

It is worth stressing, as this article from DW usefully does, that this delay and continuing uncertainty does not amount to a crisis, whatever the headline writers might like to claim. (Nor, for the record, does it mean that we are close to the end of the 'Merkel era' - again, contrary to what one might take from some recent articles.) But, clearly, it is very much in the best interests of Germany and Europe generally that the current uncertainty be brought to an end as quickly as possible. Moving to a minority government now seems to be the best way to achieve this goal.

Alastair Newton