Germany: Schulz's last best chance?

Germany's only live pre-election TV debate due to take place on 3 September could be opposition Chancellor candidate Martin Schulz's last best chance of causing an upset.

Germans go to the polls on 24 September to elect a new Bundestag, the lower house of the Federal parliament. For readers not familiar with the German electoral system, the election experts at FiveThirtyEight published this useful guide yesterday.

Early this year, it seemed possible that Germany's Chancellor Angela Merkel, looking to secure a fourth general election victory for her CDU/CSU and a fourth term for herself, could face defeat at the hands of the centre-left SPD, the CDU/CSU's current junior partner in the 'grand coalition' which has governed in Germany since the last election in 2013. This followed a change of leadership in the SPD as Sigmar Gabriel stepped to one side in favour of Martin Schulz. The subsequent 'Schulz surge' saw the SPD leading the CDU/CSU in national opinion polls for the first time in years.

However, the surge proved to be short-lived. And SPD morale has been further dented by disappointing performances in the three regional (ie länder) elections which have been held since then, most especially in North Rhine-Westphalia, Germany's most populous state, where the SPD suffered a significant defeat in May at the hands of the CDU which now governs there in coalition with the right-of-centre and economically liberal Free Democrats (FDP).

National opinion polls have been remarkably steady since then with the CDU/CSU seemingly headed for another victory at around 38%, while the SPD is languishing at just 24%.

Thus, the only TV debate of the campaign between Mrs Merkel and Mr Schulz, which will be held on 3 September, is probably the latter's best chance of turning the election around. Over 40 percent of German voters are expected to watch and something over 20 percentage points say it could influence how they vote.

Mr Schulz is a good debater (if prone, in my view, to overkill from time to time) and I expect him to go on the offensive, perhaps especially over the CDU's stated intention to raise Germany's defence spending to the NATO 2 percent of GDP target by 2024, on which he will accuse Mrs Merkel of "giving in" to US President Donald Trump. A majority of Germans remain very cautious about Germany's military footprint; so this will resonate.

However, reminding voters about Mr Trump also risks backfiring on Mr Schulz. My personal opinion since the start of the year has been that the Trump Presidency ultimately plays to Mrs Merkel's advantage as a proven 'safe pair of hands' in an increasingly uncertain and seemingly risky world.

One way or the other, Mrs Merkel is very unlikely to rise to any bait and will look to portray calm authority and experience, rather than engaging directly with Mr Schulz. This has worked well for her in past elections; but it does remain to be seen if it does so again. Like all candidates leading in opinion polls she has more to lose from debating on TV, whereas Mr Schulz presently has little other than upside. Keep in mind too that, very often in these debates, performance relative to popular expectations can count more in determining who 'wins' than performance relative to one's opponent(s); and Mrs Merkel seems to to have the possible disadvantage of starting as favourite according to polls.

All this being said, a more realistic objective for Mr Schulz than outright election victory may well be doing well enough in the TV debate (and thereafter) to keep the SPD in government, albeit as the CDU/CSU's junior partner again. The uptick in support for the FDP (which failed to cross the five percent threshold required to win seats in the legislature in 2013) under the youthful and dynamic leadership of Christian Lindner means that there is a non-negligible possibility of a return to the CDU/CSU/FDP combination which formed the federal government from 2009 to 2013.

The bottom line? I do not expect the TV debate to be a seismic event one way or the other but the pressure is on Mr Schulz to try to make it such.

Alastair Newton

Comments
No. 1-5
AlavanZambia
AlavanZambia

Following up on my initial posting.

Opinion polls tell us that Mrs Merkel clearly 'won' the debate last night.

Potentially, the most telling moment was Mr Schulz's refusal to rule out coalition with Die Linke. Although his predecessor, Sigmar Gabriel, toyed with this, to date the SPD has always ruled out such a coalition at the federal level (although there are/have been several at state level). Keep in mind that there is a left-of-centre majority in the Bundestag today (SPD, Die Linke, Greens) so theoretically we could have had this combination in government since 2013. We could well finish up with such a majority again (although the emergence of AfD since 2013 complicates things). On the other hand, by leaving open this door Schulz risks putting some voters off SPD who might otherwise have voted for 'change', especially in western Germany. Overall I think this plays to Mrs Merkel; but a risk remains if the CDU/CSU and the FDP plus the AfD fail to grab a majority of seats among the three of them (nb: clearly no-one is going into coalition with the AfD).

There will be talk, of course (is already), about a possible CDU/CSU/FDP/Green coalition: possible but low probability, in my view.

Bottom line: I think we are still looking at another grand coalition with a non-negligible upside (from the perspective of markets) 'risk' of CDU/CSU/FDP.

The second point of particular interest to investors in particular was Mrs Merkel getting pushed into trying to pull the plug permanently on Turkish EU accession. In practice this is no more than realistic. But it is sure to lead to a further downturn in already very bad relations between Ankara on the one hand and the EU in general and Berlin in particular on the other, which could also reverberate into NATO.

Kat26
Kat26

Thank you for the clarification and viewpoint

AlavanZambia
AlavanZambia

Btw, if you think I am being politically incorrect referring to 'Mrs' Merkel, it is the honorific she prefers (to 'Ms')!

AlavanZambia
AlavanZambia

Thanks Kat26. In the unlikely event that Merkel loses, it is highly unlikely that anyone other than Martin Schulz would be Chancellor. He is not well disposed towards the Trump Administration; but then neither is Merkel, although she tried very hard to cultivate a relationship with Trump up until around the time of this year's Nato Summit and Trump's announcement that the US is to leave the Paris Climate Change Accord. All this being said, Germans generally are well disposed towards the US and strong supporters of the Transatlantic relationship. Bottom line: Trump is a complication but it is very unlikely that he will permanently undermine German/US relations.

Kat26
Kat26

I don't know much at all about German politics. But this article was really informative. My question- if Ms Merkel l loses, will her opponent be friendly to US with all that is going on? Thank you.

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