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Germany’s ‘grand coalition’ is back

BERLIN:German Chancellor Angela Merkel’s conservatives and the Social Democrats (SPD) on Wednesday agreed to a coalition deal, taking Europe’s economic powerhouse closer to a new government after months of uncertainty that unnerved allies and investors.

Germany’s ‘grand coalition’ is back

(From left): Premier for the state of Bavaria and leader of the Christian Social Union (CSU), Horst Seehofer, German Chancellor Angela Merkel, also leader of the conservative Christian Democratic Union (CDU), and the leader of the Social Democratic Party (SPD) Martin at the SPD headquarters in Berlin. File



Berlin, February 7 

German Chancellor Angela Merkel’s conservatives and the Social Democrats (SPD) on Wednesday agreed to a coalition deal, taking Europe’s economic powerhouse closer to a new government after months of uncertainty that unnerved allies and investors.

In a move likely to mean a shift in Germany’s euro zone policy, media reported the SPD would take the finance ministry, a post held until recently by conservative Wolfgang Schaeuble, widely despised in struggling euro zone states during his eight-year tenure for his rigid focus on fiscal discipline.

SPD leader Martin Schulz said earlier this week that his party had ensured an agreement with the conservatives would put an end to “forced austerity” and set up an investment budget for the euro zone.

Handing over the crucial finance ministry suggests the conservatives had to make big concessions to get the SPD to agree to renew the ‘grand coalition’ that has governed Germany since 2013 and secure Merkel’s fourth term in office.

In a message posted alongside a photo of Schulz and other SPD negotiators smiling, the SPD negotiators wrote: “Tired but happy. There is a treaty! Finally. Now the final details are being worked into the text.”

The agreement should allow German to resume its leading role in international affairs and, at least for now, put an end to questions about how long Merkel will stay in her job.

Investors and partner countries had been concerned by Merkel’s failure to assemble a government in more than four months at a time when Europe faces multiple challenges, including the need for euro zone reform and Britain’s looming departure from the EU. A negotiating source said the SPD would have the finance and labour ministries while media reported the party would also secure the justice, family and environment ministries.

Bild newspaper reported that Schulz would become foreign minister, despite having previously vowed not to take a cabinet position under Merkel. Newspaper Sueddeutsche Zeitung said Schulz would quit as SPD leader and parliamentary floor leader Andrea Nahles was ready to take over.

Hamburg Mayor Olaf Scholz is slated to take over as finance ministe.

Merkel’s Christian Democrats (CDU) will get the economy and defence ministries while their Bavarian allies, the Christian Social Union (CSU), will provide the interior minister in the form of Horst Seehofer, who talks tough on migration, media reported. The news agency DPA said the conservative acting finance minister, Peter Altmaier, would become economy minister. — Reuters


Merkel loosens purse to keep power

  • To secure a fourth term as Chancellor, Angela Merkel is handing her Social Democrat (SPD) coalition partners control of the finance ministry, giving them licence to spend a record budget surplus, and embracing their demands for European reform.

  • Giving up the powerful ministry to the centre-left SPD is a particularly strong signal to Germany’s euro zone partners, many of whom endured austerity championed by Wolfgang Schaeuble, finance minister in the previous government.

  • According to a draft of the coalition agreement, the next government sees additional fiscal space of 46 billion euros over the next four years to increase investments and reduce taxes as Germany’s strong economic upswing pushes up revenues and the budget surplus

"I am convinced that the coalition agreement that we agreed together can form the foundation for the good and stable government that our country needs and that many in the world expect from us." —  Angela Merkel, German Chancellor 


Olaf Scholz has big shoes to fill as Hamburg mayor seen as new finance minister

  • Olaf Scholz, the mild-mannered, pragmatic mayor of Hamburg who could become Germany’s next finance minister, had a baptism of fire last summer during violent riots surrounding the G20 summit in his city

  • The 59-year old Social Democrat, a trained lawyer and strong advocate of closer European integration, apologised publicly for the security fiasco, but stayed calm in the face of furious attacks by right-wing critics

  • Scholz is all set to step into the giant shoes left by Wolfgang Schaeuble, the fiscally hawkish and larger-than-life veteran of German politics who now presides over the lower house of parliament, the Bundestag

  • Some conservatives fear Scholz, who recently backed a big increase in the minimum wage, could raise government spending and reverse’s Schaeuble “black zero” policy of not incurring new debt

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