February 7, 2018 / 4:27 PM / a year ago

Breakingviews - Europe is biggest winner of German coalition deal

Social Democratic Party (SPD) leader Martin Schulz (and German Chancellor Angela Merkel of the Christian Democratic Union (CDU) arrive for coalition talksin Berlin, Germany February 2, 2018. REUTERS/Christian Mang

LONDON (Reuters Breakingviews) - Marriages involve give and take. The one that German Chancellor Angela Merkel brokered with the Social Democrats (SPD) on Wednesday involves her handing over more than she originally intended to secure a fourth term in office. The resulting alliance may be better for the European Union than the political parties that are hooking up.

The SPD won ground on several issues, including restricting the use of fixed-term labour contracts. But Merkel’s most notable giveaway was to hand the SPD the finance ministry. It’s hard to understate the impact of this concession. The role used to be held by Wolfgang Schaeuble, a stickler for budget discipline at home and abroad. SPD leader Martin Schulz – who may become foreign minister – favours less fiscal rigour and more European solidarity.

True, the German parliament will have final say over any proposed loans, let alone fiscal transfers, to other European countries. But the tenor of debate in the influential euro-zone finance-minister meetings, where important decisions about monetary union are made, is bound to change. So might the extent to which Germany is willing to countenance stronger ties within the euro zone.

That may not be enough to impress the rank-and-file members of the SPD, who care more about issues such as domestic social cohesion. None of the concessions are as striking as the one on a national minimum wage that the party extracted from Merkel in 2013. And the battering that the Social Democrats have taken in the polls has made some of them wary of joining forces with her again. Support for the party has fallen further since it scored a lowly 20.5 percent in the September 2017 election. That increases the risk that SPD party members might reject the deal.

Nor will Merkel emerge unscathed. Some of her concessions on Europe have already prompted unease within her party. And giving too much ground to the SPD risks driving some of the Christian Democrats’ natural supporters into the arms of the far-right AfD, which is going to be the biggest opposition party in parliament if the red-black alliance goes ahead. German politicians who join the grand coalition may end up helping Europe more than they help themselves.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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