by Tyler Durden
The 2013 German federal elections may bring about pretty complicated results. With Merkel's junior coalition partner's (FDP) support dropping below the mandated 5% to enter parliament (according to polls), as Deutsche Bank notes, there is no point in working through the numerous possible coalition scenarios and options. In that case, the task of governing Germany and providing joint leadership in European affairs will become much more complicated than it used to be in normal times of a clear-cut victory for one camp. All inter-camp coalitions may well have a built-in tendency towards paralysis and require special political tricks that allow the partners to show their true colors in clearly circumscribed policy issues while not rocking the boat. A few years from now, September 22, 2013, might be remembered as the day when German politics finally became normally complicated, as in other countries, too. There are two major political narratives that appear dominant currently.
Via Deutsche Bank,
In normal times, a popular leader, an all-time employment record and the traditional conservatism of the German electorate ought to suffice to keep a conservative chancellor in power. A recent poll by the Institut für Demoskopie Allensbach found that respondents did not think the election would matter much, a big majority expected a victory for Merkel (63%) and only one-third of respondents favoured a change in government. For the Social Democrats to win, it often takes deep-seated dissatisfaction of the electorate with the conservative incumbent, a generally strong desire for substantial policy change and an SPD candidate who possesses most outstanding leadership qualities. In the last century, it usually took a shift of the Liberals to the SPD caucus, too. That has happened every twenty years or so. Staying in power for another term is usually possible.
Yet why are the 2013 elections not a foregone conclusion? What’s wrong with 2013? Why should we bother at all about what some observers call a “non-event”? The answer is much more nuanced than one might think. It is not the impact of the financial crisis that is shaping German politics directly these days, even though different policy responses to the crises dominate the party platforms and the ideas driving them.
Why 2013 is quite special
The 2013 elections might be quite special in that longer perspective, once again. The change in electoral law will make the German system much more like a strict proportional system in which additional mandates of one party due to the first vote being much stronger than the proportional second vote (Überhangmandate) will be fully offset (Ausgleichsmandate). Therefore, the combined second vote of the centre-right political camp is the crucial factor to watch. While this number hovered above 50% from 1953 to 1990, it decreased to 41% in 1998 but recovered to some 45-46% in the 2002 and 2005 elections and to 48.4% in 2009. Based on current polls, some seven to nine per cent of the vote may be for parties which will not likely pass the 5% threshold and thus not be represented in parliament. This implies that 45.5-46.5% of the combined vote may this time suffice for a majority in parliament.
Clearly, the trend towards a multi-party system with five/six major parties (counting CDU and CSU as separate parties gives us the number of six) and at least two small new parties – Pirates and the AfD (Alternative for Germany) matters.
Until 1982, there were only three parties, until 1998 the Greens became number four, since 1998 the Left Party has been represented in most parliaments with the exception of the 2002-05 legislature.
If the AfD were to enter parliament, it would probably attract voters from the centre-right camp in no small measure. This could directly reduce the Liberal vote to below five per cent or erode enough of the centre-right camp to drive it below the majority threshold. If the AfD enters parliament, any coalition will likely have to come close to a combined vote of 47.5% or more. If the election result of the centre-right camp were to be worse than the current polling by more than two percentage points, the options for forming a new government would dramatically narrow down to one or two mathematically and politically feasible options.
Who will run Germany next?
There is no point in working through the numerous possible coalition scenarios and options. On policy grounds, a CDU/CSU – SPD “Grand Coalition” government would be feasible but it is being very firmly dismissed by the SPD, still. Also, a coalition of CDU/CSU and Greens might be considered. All other options are almost too theoretical to mention. In any case, considering the primary political purpose of the next coalition will be the most important consideration that will take hold after September 22 if a simple continuation of the current coalition or a clear-cut shift to a SPD-Green government is not feasible. There are two major political narratives that might work.
Narrative number one works like this:
Germany must remain the economically strong stabiliser of the euro area, it needs more public investment and some additional targeted transfer payments financed out of budget surpluses if they materialize. The coalition sticks to a balanced budget and does its homework on setting up a new fiscal framework for the federal level and the states which is due in 2020, anyhow. The political climate for deep reforms of either social security systems, labour markets and education does not yet exist – this is politics for the next election. The parties cannot agree on new taxes (apart from a FTT) and will address some shortcomings in the labour market. This narrative could be told by both the CDU/CSU and the SPD. They could bring a collection of seasoned politicians into the cabinet. All truly controversial issues would be shelved, and the energy portfolio would be jointly managed. The real policy alternatives would be tabled in 2017 again. The SPD could once again try proving that it is ready to govern and would look optimistically towards running in 2017 with a new candidate and more luck. The CDU could cope and by and large pursue its objectives, albeit with a lot of compromises.
Another Grand Coalition would have an easier time with the Bundesrat, too, in which the SPD runs states that have a total of 30 votes out of 69 and in which it is the junior party to the CDU in even more states that have a total of another 18 votes. CDU/FDP jointly have 21 votes in the Bundesrat right now. If there are no changes to conservative governments in Bavaria (elections on September 15) and Hesse (on September 22), this would remain the case for quite some time. On European affairs, some pretty significant differences on details of the banking union and growth-promoting policies at the European level would have to be hammered out.
The drawback is insufficient political distinction for both major parties and a potential next round of bad luck for the SPD at statelevel elections and/or the federal level given the greater prominence of the Chancellor in such a government.
The second narrative would be that all politically easy solutions do not work right now, which is why something new has to be tried.
CDU/CSU and Greens agree to bridge the gap between their camps and allow some greening of the economy within the tight constraints of balanced budgets, no new taxes and no significant regulation or deregulation of the economy at large. On European issues, the Greens would try pushing in federalist directions but the conservatives would call the intergovernmental shots. The real difficulty of getting there is the repositioning of the Green Party to the left of the SPD on many classic tax-and-spend and regulatory issues which is upheld by party resolutions. Joining a government with the CDU/CSU would be pretty controversial for the party against that background.
If this coalition were not to work well, then the exercise could be terminated at will early on. Building such a coalition would not be that difficult as the Greens would roughly replace the Liberals, with some reshuffling of portfolios. However, on important issues consensus would have to be sought with the Social Democrats in particular to achieve majorities in the Bundesrat. Of course, the price of “yes” votes from SPD-led governments in the Bundesrat would be predictably higher if the SPD were not part of a federal government. Whether and how the politics of such a split system would work is impossible to predict. It might work in narrowly circumscribed instances such as euro area policies, the energy turnaround or enhanced investment in education and transportation. The drawback would be insufficient transparency and political accountability in such a multi-layered system.
The 2013 federal elections may bring about pretty complicated results. In that case, the task of governing Germany and providing joint leadership in European affairs will become much more complicated than it used to be in normal times of a clear-cut victory for one camp. All inter-camp coalitions may well have a built-in tendency towards paralysis and require special political tricks that allow the partners to show their true colours in clearly circumscribed policy issues while not rocking the boat. A few years from now, September 22, 2013, might be remembered as the day when German politics finally became normally complicated, as in other countries, too. It might, albeit indirectly, be a consequence of small shifts in the party system in response to the euro crisis. Even rock-solid political systems do not live on political islands.
If the current coalition does not have a majority in parliament, building a new government will be quite difficult and depend heavily on the specific outcome. A CDU/CSU-Green coalition or another Grand Coalition of CDU/CSU and SPD might be the only options in town. On many policy issues, difficult compromises would have to be found. On European issues, only slight changes in the policy positions on banking union and other issues would be plausible.