A New Old Big Government Coalition in Germany

A new Big Government coalition has been formed again in the Federal Republic of Germany which comprised the winners of Parliamentary election – CDU/CSU and losing Social Democrats. For the first time in the after-war history the process of coalition negotiations and establishment of the government took so much time. For the first time, the destiny of a coalition agreement depended on the intra-party referendum. For the first time, the two peoples parties – traditional political opponents – are trying, almost four years later to move Germany towards reforms which it needs so badly.

A new Big Government coalition has been formed again in the Federal Republic of Germany which comprised the winners of Parliamentary election – CDU/CSU and losing Social Democrats. For the first time in the after-war history the process of coalition negotiations and establishment of the government took so much time. For the first time, the destiny of a coalition agreement depended on the intra-party referendum. For the first time, the two peoples parties – traditional political opponents – are trying, almost four years later to move Germany towards reforms which it needs so badly.

Unexpected results of the vote

The CDU party, led by Angela Merkel, and its junior partner the Bavarian CSU (chaired by Horst Seehofer) have become the winners of the elections to the lower chamber of the German parliament. This coalition gained 41.5 per cent of the votes on 22 September 2013 as it was expected by German and Russian experts. It was less expected that the party of Liberal Democrats was not elected to the Bundestag, having reached less than the margin of 0.2 per cent to come over the 5 per cent threshold established by the law. The euphoria that reigned among the Christian Democrats at the night after election rapidly changed to "sobering" – to gain absolute majority in the Parliament they lacked just a few seats (however, even if they had these seats, their government wouldn't get a reliable and guaranteed parliamentary support to carry out the required reforms), LDP did not pass to the Bundestag and SPD and the Greens that received quite moderate 34.1 per cent, initially rejected any coalition with the CDU and CSU pointing out at a number of irreconcilable differences with their political opponents. For example, during the TV debates of 2 September 2012 the candidate to chancellorship from Social democrats, Peer Steinbrück despite positive assessment of the former big coalition by the acting Chancellerin refused to consider any potential coalition work with the CDU [1]. It seems that Angela Merkel envisaged this eventual situation but could hardly expect such a development.

The CDU and CSU were compelled to start talks with the two uncomfortable candidates for coalition talks, whereas the Social Democrats seemed to be the most acceptable from the viewpoint of potential constructive compromises. According to the polls [2], the option of a Big Coalition seems to be the most preferable for the majority of Germans – in mid-December an acronym (GROKO - Grosse Koalition) was chosen for this coalition. The preliminary stage of selecting a potential partner took almost 1 month.

The main benchmarks and specifics of coalition talks

The official discussion of the future draft coalition agreement began on 23 October 2013 [3]. The participants from each party (about 300 people) were designated to discuss the future government agreement and 16 thematic working groups were established. Initially, the participants in the talks agreed not to discuss the candidates to the ministerial posts. The parties also reached an understanding of principle that out of 14 ministerial posts the CDU would get 5 (one post less than in the former government), the CSU – 3 and SDP – 6 positions (which is one post more than the former coalition partners). Moreover, the representatives of the Christian democrats retained the post of the Head of government and Chief of Federal Chancellery (also called Federal minister for special matters). The leadership of Social Democrats received the mandate for coalition talks at the restricted attendance party congress on 20 October. Simultaneously, a decision was made to hold the vote (i.e. an intraparty referendum) among 474.820 members regarding the destiny of future arrangements. The decision made at the party top of Social Democrats was quite risky. Many party members actively opposed the Big Coalition rightly considering that over the last four years the party failed to renew itself and that only one period in opposition can help it recover its former popularity and political efficiency again, whilst this wouldn’t happen if it took part in the government – it would be an even weaker partner within that government, which would only worsen the SPD positions in the German electoral environment. A number of party organizations (for instance in Berlin) sharply criticized the SPD leadership for having refused to discuss the prospects of Red-Red-Green coalition, i.e. potential cooperation with the Lefts. Therefore, the party leadership had to engage in a public outreach with regional party organizations along with the coalition talks [4]. In mid-November 2013 a regular SDPG Congress was convened in Leipzig. This congress re-elected the party leadership (chairman of the party Sigmar Gabriel and secretary-general Andrea Nahles received substantially less votes as compared to the previous elections), confirmed the overall readiness of Social Democrats to work in the government with the Conservatives but at the same time expressed its potential readiness for future government coalition with the Lefts in 2017. This provision can be regarded as a clear pressure on the partners engaged in coalition negotiations conducted in parallel to the congress and as a step towards the left-wing party members which gained momentum over the last months. It was an emphasized by such provisions of the concluding resolution as: "The SPD remains a left popular party of reforms" aiming at the policy of "greater social justice" in the Federal Republic of Germany.

Coalition agreement as a product of compromise

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The talks were conducted until the 27th November and took slightly more than one month. The programs of the CDU/CSU coalition became the basis for coalition talks [5]. It was clear from the inception that the parties would seek mutually acceptable compromise solutions. On the one hand, they would have to guarantee the viability of the future government and its intent to continue required reforms, and on the other hand to avoid the protest feelings among the members and supporters of their parties.

Even during the preliminary meetings the participants agreed that the European policy, state finances, energy, infrastructure and family policy would be the focus of negotiations while the specific details of their discussions would be confidential and not made public. Despite a substantially lower percentage of votes obtained by the Social Democrats at the federal elections they were getting certain additional advantages from the so-called ‘land’ factor: they are represented today in the government of 13 (out of 16) lands of Germany and are heading the government in the 9 lands.

Each of the parties to the talks had some positions of principle that they wanted to include in the final agreement as a compulsory provision. For Social Democrats, it was a minimum hourly wage and regulation of hired work force; and for Christian Democrats – a balanced state budget (and in this context – no further tax increase) and maintaining a tough policy in the euro zone; for CSU – introduction of road tax for passenger cars.

Besides, it was important for negotiators to agree on the financial parameters of the future government spending on large-scale infrastructural projects that were announced in the electoral programs.

During the intensive work of the groups and subsequent discussions at the general plenary meetings the parties did not only reach compromise on the most acute topics but agreed on the basic areas of activity of the coalition government for the next four years. It is important to note that the talks continued on the backdrop of the ongoing GDP growth that began in 2010 (due in particular to growing domestic demand) a record employment and low unemployment and substantial increase of contributions to the state treasury and reduction of new borrowings. The positive expectations are also associated with the prospects for 2014. According to the December evaluation by the ZDF (second German TV channel) 72 per cent of German citizens positively assessed the 2013 and 59 per cent thought that the 2014 would be the same and 34 per cent – that it would be even better [6].

Essential provisions of the agreement

The coalition agreement is entitled “To design the future of Germany” (Deutschlands Zukunft gestalten) [7] consisting of preamble and eight operative sections:

• Growth, innovation and well-being;
• Full employment, decent job and social security;
• Reliable finances
• Cohesion of the society
• Modern state, internal security and civil rights;
• Strong Europe
• Responsibility in the world
• Mechanism of coalition’s work

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This document clearly describes in its section on energy policy that the two parties support further reform of the legislation on renewable energy and increase of the share of renewable sources in the energy balance of the country to 40-45 per cent by 2025 and to 55-60 per cent by 2035. There is no provision in the treaty on reducing the electric power tax for consumers which the SPD called for (CDU/CSU were against it) but there is an indication to the need to adopt in 2014 a national plan of actions in the area of energy efficiency that should take into account the interests of consumers among other elements.

The provision on the road tax for foreign-registered motor-vehicles is a compromise provision – since all three parties kept to different positions in this regard. As a result, they agreed that the tax should concern only the foreign drivers and be consistent with the existing EU regulations. Before the Autobahn Toll Tax is officially introduced, an additional analysis of legitimacy and operability of the future tax collection mechanism will be conducted. After this analysis the relevant registration will come into force in 2014. The collected funds are intended to be used for funding the transport infrastructure.

Even before the elections the social democrats supported A. Merkel in her tough policy with regard to the eurozone. A. Merkel, on her part, did not object to the demand of Social Democrats to introduce a financial transactions tax. This was fully reflected in the coalition agreement.

The decision to introduce an hourly wage at the level of no less than 8.50 euro across Germany became one of the essential compromises for the SPD. Having made this concession the Conservatives achieved a consent to a transition period until 2017 under which (and according to the existing tariff autonomy system which will receive additional guarantees) the employers and trade unions in the regions will be authorized to conclude tariff contracts with an hourly wage below an agreed minimum. The minimum rate will not be extended to interns and students and expatriate workers from other countries employed in the Federal Republic of Germany (normally in construction works) – since their activity is regulated by special legislation (Arbeinehmer-Entsendegesetz (AEntG). This should reduce the risks of decreasing competitiveness of German enterprises and its growing unemployment associated with it.

The provision on the hired workforce (“Leiharbeit”) also became an important compromise for social democrats, according to which the leasing of a worker by specialized companies is limited to 18 months. Moreover, after 9 months of leasing the wage of hired workers should match the level of hired employees.

The agreement on the introduction of minimum pension for unskilled and low-income workers and employees who contributed to the system of state pension insurance during 35 years is also one of social achievements.

The section dealing with domestic policy contains an important provision on dual citizenship of migrants’ children born in Germany. Until now the legislation did not envisage such a provision. These children were supposed to make a compulsory choice between the FRG citizenship and their parents’ country of origin no later than reaching 23 years of age.

Now the persons born and bread in Germany after 1990 will enjoy the legislative provisions which will allow them to have passports of the two countries.

Another provision of principle was the statement on maintaining the policy toward achieving the Maastricht criteria in the area of finances that envisaged the reduction of the share of national debt below 60 per cent of GDP by 2023 (in 2012 it totaled 81 per cent and should be less than 70 per cent in 2017). All obligations within the eurozone will be maintained and the policy of state subvention system reform will be continued together with strengthening the budget targets on funding investments to implement specific projects (infrastructure, etc.). The parties reached an important compromise that the taxes would not increase and agreed at the same time that this provision would not be clearly recorded in the agreement. The total amount of targeted expenditures turned out to be much less than initial expert estimates above 50 billion euro [8]. By and large, the provisions of the coalition treaty are to promote competitiveness of German industrial and political and social and economic environment but does not contain any breakthrough provisions (if compared e.g. with the well-known reforms of the labor market by Gerhard Schröder (Agenda 2010) launched in March 2003). It is rather a continuation of cautious pinpoint fine-tuning policy of the existing model of regulation of economic and social processes which, however, continues to necessitate reforms and restitution of ordoliberal values and ideals.

The relations with the European Union will continue to be a priority area of foreign policy with the main task of promoting the centripetal integration processes, overcoming the crisis processes, strengthening the European financial and banking system and developing the internal European market which should contribute to economic growth and increased employment. Together with German-French partnership a particular attention is paid to the development of cooperation with Poland, including the Weimar triangle and the Czech Republic.

The trans-Atlantic partnership and interaction with NATO remains another important foreign policy target. The EU-US free trade agreement is to become one of the central projects for the following years supposed to remove a number of existing barriers to the movement of goods, services and capital. A separate paragraph deals with the importance of further work of Russia-NATO Council. It is indicative that this paragraph is followed by a separate article on the relations between Germany and the Russian Federation. The provisions from relevant sections of the CDU/CSU and SPD programs were used as a basis [9] which were detailed and expanded by the members of a relevant working group.

A new coalition government: sensational appointments and reorganization of the ministries

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SPD Chairman Sigmar Gabriel

The relations with the European Union will continue to be a priority area of foreign policy with the main task of promoting the centripetal integration processes, overcoming the crisis processes, strengthening the European financial and banking system and developing the internal European market which should contribute to economic growth and increased employment.

The party leadership of the future government agreed simultaneously to announce the distribution of ministerial portfolios and their relevant candidates. However, the SPD even before the final count of the votes of the intraparty referendum (out of 369,680 voting members 75.9 per cent said yes to the agreement – official information was made public on Saturday, 14 December), made a leak Friday night that Sigmar Gabriel (chairman of the party) was going to take the post of the head of the new ministry of economy and energy (which will also supervise the energy policy that was earlier under the auspices of the ministry of environment), Andrea Nahles (formally – secretary-general) – will be minister of labor and social issues, and Frank-Walter Steinmeier – minister of foreign affairs, Manuela Schwesig (deputy chairman of the party) – minister of family, aged people, women and youth. The treasurer of the party Barbara Hendricks became quite unexpectedly for the expert community a candidate to the post of the head of the new ministry of environment, protection of nature, construction and nuclear safety, and Heiko Maas – land minister of economy from Saar – became a candidate to the post of the head of the new ministry of justice and consumer rights protection (the latter function was transferred from the ministry of agriculture).

This meant among other things that from the view point of further reforms the Social Democrats agreed to cede essential positions of the minister of finance and the minister of interior.

As early as Saturday, one day before the official announcement, after the SDPG the Christian Union also presented unofficially the names of its candidates to journalists – Wolfgang Schäuble (retaining his post) and Thomas de Maizière (former minister of defense) were assigned as candidates to the above-mentioned positions. The preliminary nomination of Ursula von der Leyen to the position of the head of the ministry of defense who is also in charge of an uneasy reform of Bundeswehr (she personally wanted to be appointed to the chair of the minister of health) became a sensation. If in the following years she manages to address the tasks assigned to her, her chances to become the main successor of Angela Merkel as the chair of the party and Federal Chancellor will significantly increase. Another sensation was that Ronald Pofalla, the Bundes Chancelerin trustee, declined the position of the state minister as the head of the federal Chancellor administration. Another politician, Peter Altmeyer, who is close to the chancellor and had replaced by her decision her former protégé Norbert Röttgen in 2012 on the post of the minister of environment, has been recommended instead. Two other ministries are to be headed by the representatives of the CDU – Johanna Wanka (same position) and Hermann Gröhe (secretary-general). The Bavarian CSU obtained the following three ministries: presumably the new ministry of transport and digital infrastructure should be headed by Alexander Dobrindt (secretary-general) and the ministry of food and agriculture (which will be significantly weakened by the transfer of some powers to the ministry of justice) will be headed by Hans-Peter Friedrich (formerly – minister of the interior) or Peter Ramsauer (earlier – minister of transport), two ladies – Dagmar Woehrl (earlier – state secretary of the ministry of economy) or Marlene Mortler – were the main candidates to the post of the minister of economic cooperation and development. From the former composition of the cabinet Kristina Schröder (CDU, minister of family affairs) and Ilse Aigner (CSU, minister of agriculture) declined the offer of appointment in the new government.

On Sunday, 15 December, most of candidates were officially confirmed by the party leadership (H.P. Friedrich was recommended to the post of the minister of agriculture by the CSU and unexpectedly the former state secretary in the ministry of agriculture Gerd Müller was recommended to the post of the head of the ministry of economic development). Accordingly, the names of the state secretaries of the ministries were officially announced, among whom the name of Jörg Asmussen, the FRG director in the European Central Bank, became a sensation as one of such secretaries in the new ministry of labor. Peter Altmeyer (CDU, head of federal chancellor administration), Helghe Braun (Chancellery), Aydan Özoğuz (SPD, migration, refugees and integration), Monika Grütters (CDU, culture and media) and Maria Böhmer (MFA) were designated as state ministers. In addition, a new post of a state minister for special services supervision was introduced but the appointment of a candidate is still pending.

On 17 December the Bundestag elected Angela Merkel for the third time as the head of government by a majority vote. She formed the government in accordance with the decision by the new coalition partners. It is important to note that the number of federal agencies has not increased and some ministries were reformed – with some functions redistributed among them. The goal is to eliminate traditional internal interagency contradictions which prevent their efficient functioning and implementation of the planned reforms. Primarily they are related to energy policy which has been reassigned to the ministry of economy and consumer rights protection which are now dealt with by the ministry of justice (the two ministries are headed by SPD members).

The prospects of the new team of A. Merkel – first evaluation

The new big coalition comprising the CDU/CSU and SPD is relying on the majority in the lower chamber of parliament and potential support in the upper chamber which allows it to successfully carry out the intended reforms with relatively weak opposition. The professional composition of the government (both at the level of ministers and state secretaries whose number has increased) as well as agreed-upon goals and main areas of activity within the framework of the coalition agreement make it possible to assume that most of the tasks will be implemented during the next four years.

It is important that the Social Democratic leadership, especially Sigmar Gabriel, have substantially improved their standing during the coalition negotiations as a result of their thorough work with the party rank and file members and contributed to consolidation of the party (this became the best gift for its 150th anniversary and the 100th anniversary of one of its eminent leaders Willy Brandt). The coalition agreement has mainly taken into account the basic suggestions of SPD but preserved the conservative principles as well as the ideas put forward by the Christian Union. A respectable and reliable colleague from the coalition who made a progress in terms of professional competence and ability during the period after elections to the Bundestag came as a reinforcement as a vice-chancellor to Angela Merkel.

On the other hand, the work of the big coalition will confront a number of difficulties and problems. All this has to do with a need to update in early 2014 a number of essential provisions of the coalition agreement and develop specific implementation mechanisms. The Germans like to say that “devil is hidden in the details”, and the discussion of future seemingly unimportant little things will be a sort of test of resistance and viability of the new government team. This concerns primarily the energy policy including the pricing of energy products, modernization of transport and communication infrastructure and expensive projects in social and pension spheres.

It is not coincidental that the German business, primarily the middle-sized business, reacted quite cautiously both to the coalition agreements and the distribution of the ministerial posts having assumed that the influence of the social democratic factors of the economic policy of the government may lead to higher costs and lower competitiveness of the manufacturing enterprises. Angela Merkel assigns the essential role in this regard to the minister of finance Wolfgang Schäuble who can introduce tough regulation of cash flows and repel the attempts of the colleagues from the coalition to exceed the agreed budget allocations.

As far as Russia is concerned, it acquired the partners represented by the new big coalition who would be ready to further promote bilateral cooperation in the context of the European and trans-Atlantic interests. It is a matter now of specific tactical steps, initiatives and the search of the points of growth and projects that could give new impetus and content to our cooperation at all levels and in all spheres in the framework of continuing partnership for modernization.

1. Election results. See: http://www.wahlrecht.de/umfragen/ Without direct support of Angela Merkel the Liberal Democrats lost their chances to be elected to Bundestag. According to weekly polls of leading sociological institutes of Germany (Allensbach, Emnid, Forsa) conducted after 22 September, the Free Democratic Party regularly received substantially less than 5 per cent in the electoral preferences of Germans before mid-December 2013; whilst the Alternative for Germany party, which gained sensational 4.7 per cent at the election to Bundestag, exceeded the 6 per cent level during some pre-electoral weeks (never going below 5 per cent).

2. http://www.zdf.de/Politbarometer/2013-war-f%C3%BCr-die-meisten-ein-gutes-Jahr-31112678,2942200.htm

3. Merkel: 2017 soll Deutschland besser dastehen als heute // Frankfurter Allgemeine Zeitung vom 23. Oktober 2013.

4. 32 regional conferences were held in total where the representatives of the party leadership tried to convince the party members of the need to support the coalition arrangements. By early December, the situation for Social Democrats became slightly complicated as a result of the failure of the talks with CDU in the federal land of Hessen; and an was agreement reached on the establishment of the Black-Green coalition,

5. See also: Vladislav Belov. The party political landscape of Germany before the Bundestag elections. /inner/?id_4=2275#top)

6. http://www.zdf.de/Politbarometer/2013-war-f%C3%BCr-die-meisten-ein-gutes-Jahr-31112678,2942200.html

7. It seems to me that the word ‘design’ (another correct version is ‘to form’ in the Russian translation defines more clearly the meaning of the title of the treaty than the words ‘to define’ or ‘to work towards’ which are often used in the Russian media. See the original text: Deutschlands Zukunft gestalten. Koalitionsvertrag zwischen CDU, CSU und SPD. 18. Legislaturperiode. 185 S. (Can be reached at http://www.handelsblatt.com/downloads/9133918/3/Koalitionsvertrag_CDU-CSU-SPD)

8. http://www.handelsblatt.com/politik/deutschland/kabinett-nimmt-formen-an-die-neue-regierung-kommt/9219558.html

9. See also Vladislav Belov. Russian-German relations after Bundestag elections – Russia’s opinion// Russia today and tomorrow. Friedrich Ebert Foundation Office in the Russian Federation. Manager Rudolf Traub Merz. November 2013 p. 5 (http://fesmos.ru/publications/russland/russland-ff_113.html)