German Chancellor Angela Merkel’s conservatives and the center-left Social Democrats (SPD) clinched a coalition deal yesterday that puts Germany on track to have a new government in place by Christmas.
Merkel says her new government will stand for solid finances in Germany and continue to oppose a “debt union” in Europe.
She said after party leaders signed the deal that the coalition will stand for “secure prosperity and social security.”
It will introduce a national minimum wage and raise pensions for some, but also is pledging not to raise taxes.
A potentially tricky hurdle remains before Merkel can be sworn in for a third term: The SPD is putting the agreement to a ballot of its members. The result is expected on Dec. 14.
The agreement was struck about two months after Merkel was the clear winner in national elections, but fell short of a parliamentary majority, forcing her into talks with the SPD, with whom she ruled in an awkward “grand coalition” during her first term as German chancellor from 2005 to 2009.
The agreement will be greeted with a sigh of relief in other European capitals. The lengthy talks have delayed movement on major European reforms, including the creation of a “banking union,” an ambitious project designed to prevent a recurrence of the eurozone’s crippling debt crisis.
“The result is good for our country and has a conservative imprint,” said Hermann Groehe, secretary general of Merkel’s Christian Democrats (CDU).
To clinch the deal, Merkel agreed to SPD demands for a minimum wage of 8.50 euros (US$11) per hour, which some economists have warned could push up unemployment, particularly in eastern Germany. The wage is to be phased in over a period of years, with sector-specific exceptions allowed until 2017, when the wage formally begins nationwide.
On European policy, Merkel’s insistence on painful economic reform in struggling euro states will continue, despite SPD promises during the election campaign to take a more pro-growth approach in a single currency bloc ravaged by high unemployment.
A closely watched compromise on banking union between the parties makes clear that the 17 member states have primary responsibility for dealing with their own stricken banks, and can only turn to a common taxpayer-financed European fund for help when all other avenues have been exhausted.
Teneo Intelligence political analyst Carsten Nickel said the SPD had realized, after flirting with the idea of common eurozone bonds, “that the domestic political consensus does not reward any large-scale deviation from Merkel’s path.”
Although the Cabinet posts have not yet been announced, German Finance Minister Wolfgang Schaeuble is widely expected to keep his job. Frank-Walter Steinmeier of the SPD may return as foreign minister after holding the post in the last “grand coalition.” SPD Chairman Sigmar Gabriel, another member of that Cabinet, could get a beefed-up economy ministry.