Merkel to Lure Opponents into Coalition, Conservatives Wary

The German leader may have no choice but to break her election promise and raise taxes.

German chancellor Angela Merkel will try to form a coalition government with her Social Democrat opponents after narrowly failing to secure an absolute majority in parliament for her ruling conservative party two weeks ago.

Winning 41.5 percent of the votes, Merkel’s Christian Democrats fell just five seats short of a majority in elections for the Bundestag, the lower chamber of parliament. Left-wing parties also still hold a majority in the upper chamber, meaning a minority government — which Germany hasn’t had since before the Second World War — is a last resort at best.

The Social Democrats, who only modestly improved upon what was their worst postwar election performance four years ago, are likely to demand significant concessions for entering another “grand coalition” with Merkel’s conservatives. The last such left-right alliance was exactly what cost them more than 10 percent support in 2009.

The left could technically find a majority of its own but the Social Democrats have ruled out forming a coalition with Die Linke, the successor to former East Germany’s ruling communist party which got 8.6 percent support.

German news media report that the Social Democrats will demand six cabinet posts, including the powerful Finance Ministry which has been held by Merkel’s conservative ally and fiscal hawk Wolfgang Schäuble throughout the European debt crisis.

Even if polls show that a vast majority of Germans favor another grand coalition, conservatives are wary. They pledged not to raise taxes before the election while the Social Democrats will have little to show for if they don’t get any. Like the Greens, they advocate raising the top income rate from 42 to 49 percent. They also favor a nationwide minimum wage. Merkel resists both proposals which she fears will undermine Germany’s competitiveness.

Conservative party heavyweights have reassured right-wing voters that tax increases are off the table. “Our election manifesto is absolutely imperative: We reject tax increases,” said party secretary Hermann Gröhe last week. Bavarian prime minister Horst Seehofer, who won a resounding victory for his party in state elections a week before the federal vote, similarly dismissed the left’s tax proposal as “unspeakable and totally superfluous” in an interview with the tabloid Bild.

The conservative press has been no less adamant. Dismissing the Social Democrats’ demands as “megalomania,” Die Welt newspaper argued that Merkel “has been tasked by the German people to continue her policy. She won on two issues — reforming the European Union and preventing tax increases. The Social Democrats lost the election with their vague message on Europe and support for higher taxes.”

The paper warned that if Merkel breaks her word, other European countries might conclude that she will similarly water down her demands for institutional reform in the eurozone. “A broken promise today will undermine Germany’s authority in Brussels.”

In a grand coalition, Merkel will likely have to pursue a sightly more pro-European policy in any event. Politically, the greater danger for her is that it might convince rightwingers to vote for Alternative für Deutschland in next year’s elections for the European Parliament. The Euroskeptics failed to cross the 5 percent election threshold last month but enjoy considerable support among German voters who are tired of bailing out weaker states in the periphery of the currency union.

The chancellor’s only other option is drawing the Greens into a coalition but they have yet to resolve whether to lurch to the left or to the center after a disappointing election performance that prompted their leaders to resign. If the more pacifist and socialist wing of the party ends up in control, a coalition government with the conservatives will be out of the question.

Merkel has nevertheless scheduled talks with the ecologists, possibly to put pressure on the Social Democrats who plan to call a party conference to approve any coalition plans — which is meant to put pressure on Merkel in the first place as members are unlikely to vote in favor if they don’t get their way on at least some signature policies.