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Merkel and Rivals Strike Deal on New German Government
German Rivals Reach Pact for Coalition Government
(about 17 hours later)
BERLIN — Chancellor Angela Merkel and her main rivals agreed early Wednesday to a blueprint for Germany’s next government, bringing to a close five weeks of negotiations that ended in a 17-hour session.
BERLIN — After five weeks of negotiations, Chancellor Angela Merkel’s conservatives reached an agreement on Wednesday with their Social Democratic rivals on a program for a new coalition government, with concessions to the left that pleased labor leaders and almost immediately drew criticism from business interests.
But before Ms. Merkel can launch the next coalition between her conservative bloc and the center-left, the deal must still be put to a vote before the 470,000 members of the Social Democrats, who would serve as the junior partner in the agreement.
The 475,000 members of the Social Democratic Party must still vote on the agreement before it can take effect.
The accord, detailed in some 180 pages, will introduce Germany’s first minimum wage, at 8.50 euros an hour, starting in 2015. In late-night meetings, Ms. Merkel and the leaders of her Bavarian sister party, the conservative Christian Social Union, and the Social Democrats, also whittled down compromises on pensions, allowing young Turks and others born in Germany to maintain dual citizenship and on a highway toll that will affect millions of foreigners transiting the country, probably from next summer.
The 185-page document calls for establishing a national minimum wage — a first for the country — as well as increased pensions for some recipients and early retirement eligibility for others. It would offer dual citizenship to Turks and other foreigners who are born and raised in Germany, and it promises a new law by next summer to revitalize plans for renewable energy.
Exhausted negotiators pronounced themselves satisfied with the accord, with Social Democrats expressing guarded confidence that their rank and file will approve the pact by mid-December in a planned mail-in vote.
More broadly, though, it reaffirms Germany’s current course in Europe, much criticized by southern Europeans as burdening them with austerity. And the plans for improving Germany’s ailing infrastructure seemed likely to fall far short of the extra 7 billion euros, or $9.5 billion, a year in spending that a commission of government experts said was needed.
Going into marathon negotiations the past two days, drafts of the accord lacked a sweeping vision for the so-called grand coalition — a pact between Germany’s two biggest parties that also governed from 1966 to 1969, and in Ms. Merkel’s first term as chancellor from 2005 to 2009.
Ms. Merkel, who has moved her Christian Democrats considerably to the center over her eight years in office, agreed to the concessions because “she saw that she really had no alternative to the grand coalition” with the Social Democrats, said Uwe Jun, a politics professor at the University of Trier.
Instead, the document emphasized the need to maintain Germany’s competitiveness – as well as that of Europe. But it was definitely Germany first: in several sections – from health care to education to media and culture – it stressed, albeit in a confident tone, the urgent need for Germany to adapt to the primacy of the digital world.
“This is very much in Ms. Merkel’s pragmatic style of government,” he said, noting that the concession she made had polled well among all Germans. The parties, he added, could promote the program as a favorable one for average, hard-working citizens.
“Our country needs a new time of innovation,” the accord said in its opening sentences, using the term Gründerzeit, referring to the great upswing in the mid-19th century. “We want to strengthen entrepreneurship and the spirit of innovation and make them more respected. We will also improve the conditions for innovation and investment, especially for small and medium businesses.”
Ms. Merkel, who appeared tired after long hours of negotiations in recent days, presented the program at a news conference on Wednesday alongside Sigmar Gabriel, the chairman of the Social Democrats.
“The part played by Europe in the 21st century depends decisively on whether we succeed in keeping up with the digital realm, set European standards and thus preserve our European social model,” the accord said.
“We came into the negotiations with very different positions, so it took a little while,” Ms. Merkel said. “But I found the talks very positive.”
Particularly when referring to the recent rift with the United States over eavesdropping and data privacy, the accord said German or European standards of protection should apply where possible. A new trade deal with the United States is vital, the accord said, but should embrace European standards in protecting data, consumers, the environment and food standards.
Despite loud criticism from his party’s rank and file, Mr. Gabriel said he was confident that his members would back the agreement when the party vote concludes Dec. 14. Only then will the new cabinet ministers be named.
The new government will remain committed to meeting Germany’s goal of closing all nuclear power reactors by 2022 and meeting the targets of slashing greenhouse gas emissions by 2030.
Wolfgang Schäuble, 71, the current finance minister, is considered virtually certain to keep that job, so it is likely that a Social Democrat would run the Foreign Ministry; speculation centered on Frank-Walter Steinmeier, who was the foreign minister in Ms. Merkel’s first grand coalition government from 2005 to 2009.
A key element of the effort to expand renewable energy will be to ease the burden on consumers, who have borne much of the cost of the energy transition. This will involve reforming the country’s renewable energy law by next summer, including a restructuring of the feed-in tariff system and reductions to incentives for wind power in areas where it is already widely in use.
But the focus on Wednesday was more on the program, which one leading analyst, Prof. Jürgen W. Falter of the University of Mainz, noted contained many nebulous passages and vague promises.
In addition, the policy of exempting about 2,300 companies from renewable energy surcharges will be reviewed, but not scrapped. The policy is aimed at maintaining Germany’s international competitiveness but has come under fire for unfairly shifting too much of the costs to smaller businesses and private consumers.
Germany’s important business lobby echoed fears expressed by the government’s Council of Economic Advisers this month that Ms. Merkel and her partners were moving away from the labor and welfare overhaul policies of the last Social Democratic chancellor, Gerhard Schröder. Those policies are widely seen as a foundation for the country’s success in overcoming the 2008 financial crisis and weathering the euro zone’s troubles since.
The coalition also foresees a restructuring of the power market and a continued expansion of the power grid, policies that have taken shape under Ms. Merkel’s previous government. A moratorium on shale gas fracking will also be maintained, the agreement said.
The council “was right with its evaluation that this could lower German growth in the long term,” said Jörg Krämer, the chief economist of Commerzbank, in a telephone interview.
Whether this German government — assuming it takes office — is more adept at keeping promises of adapting to the 21st century than in the past is unknown. For years, for instance, governments have acknowledged the need to invest more in ailing infrastructure – particularly roads and bridges in heavily populated areas of former West Germany, which did not benefit from the trillion or so euros invested in East Germany after reunification.
Even so, he said, “I expect that Germany will continue to outperform the rest of the euro zone in the coming years,” because of low interest rates and the lag in effect of any policy shifts.
The current accord foresees as much as €2 billion a year extra for road, rail and waterways, but that is well below an estimate of €7 billion a year that a commission of government experts recommended.
Establishing a minimum wage of €8.50, or $11.54, an hour was a central demand of the Social Democrats, but the agreement puts off its effective date until 2015, and three years later for sectors of the economy that already have minimums set by collective labor agreement.
Some money — in the range of hundreds of millions of euros — may come from the new highway toll for non-German vehicles crossing Europe’s largest transit country. Although Ms. Merkel vowed during the election campaign that “with me, there will be no toll,” she apparently conceded to the strong demand from her Bavarian sister party — on condition that it not violate European laws. The toll will be introduced next year, affecting millions of Europeans traveling on pleasure or business.
Still, Ver.di, Germany’s largest service workers union, praised the agreement for setting clear goals to improve the lives of workers. “Millions of people will enjoy larger paychecks and better working conditions,” said Frank Bsirske, the union’s chairman.
The sections in the accord on Europe and on financial policy contained few surprises. The document reiterates the primacy of the “unique” Franco-German partnership in Europe but also stresses how important it is to strengthen German-Polish ties. It also says that German should become a working language of the European Union, alongside French and English. That reflects the electoral program of Ms. Merkel’s conservative bloc and also seemed to show that Germany is comfortable asserting its interests in Europe.
By contrast, one of the nation’s most important industry groups, the Association of German Engineers, said the coalition pact “lacks the spirit of big ambitions: too little change, too backward looking and too many blank checks.”
In that vein, the accord confidently reiterates Germany’s financial policies and particularly its frequently voiced belief that weaker European economies are entitled to “solidarity” but must also take responsibility for their own affairs. Many in struggling southern Europe read this as continued austerity prescribed and administered by Berlin. German officials insist they are no stricter with others than with themselves, and have so far shrugged off demands from Brussels and Washington to spend more of their surplus.
“What we miss above all is any impulse for more private investment” in Germany, the association said in a statement.
The accord reiterates that taxpayers should not pay for any bank failures or closures and that funds from the European Stability Mechanism should not be directly available for closing banks. Similarly, it rejects all mutualization of debt in the euro zone, and foresees a renewed German push for a financial transactions tax.
Ms. Merkel’s conservative ally, Horst Seehofer, the premier of Bavaria, appeared satisfied that he would get his main demand, to institute a highway toll that could generate hundreds of millions of euros each year from foreign motorists and business vehicles. But analysts and even some prominent members of Ms. Merkel’s bloc noted that the toll would be instituted only if it was compatible with European laws and only if German motorists incurred no additional cost.
Both Ms. Merkel and Mr. Gabriel emphasized at their news conference that getting the country’s ambitious energy policy right would represent what she called “a huge chance for Germany.” Mr. Gabriel said that “the whole world is watching this country” and that failure could hurt Germany’s competitiveness, a watchword of the coalition accord and a pet theme of Ms. Merkel’s.
Referring to the recent rift with the United States over its electronic eavesdropping, the program noted that a new trade deal with America was vital, but that it should embrace European standards for protecting data, consumers, the environment and the food supply.
