German coalition talks kick off after bruising election result for Merkel

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After the re-election of Germany’s Angela Merkel to a fourth-term in power, the hard task of political negotiations to form a coalition government has kicked off and could take weeks, if not months.

Talks are reported to have begun between Merkel’s conservative alliance of the Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU), and the smaller, pro-business Free Democratic Party (FDP) and the Greens.

Badly wounded in the election, the center-left Social Democratic Party (SPD) said that it would become the main opposition party and would not join any coalition, even if talks stumble between Merkel’s conservative bloc and the smaller parties – which have conflicting views on issues ranging from the environment to European integration.

Ralf Stegner, deputy leader of the SPD, reiterated that point to CNBC, saying the “door is closed” on any renewal of the “grand coalition,” particularly after his party fared so badly in the election. It gained 20.5 percent of the vote, down from the last election in 2013 when it received 25.7 percent.

“The door is closed and the voters have spoken,” Stegner told CNBC on Monday. “And now I think it’s clear that we have to regain strength as the opposition and that’s what we want to do.” Calling the election result a “black day” for social democracy he said voters “were very clear that we have to go into the opposition.”

On Monday, Merkel said in a press conference she had heard the SPD’s comments on becoming the main opposition rather than a junior partner in a new coalition, but said that “nevertheless, we should remain in contact.”

With a so-called “Jamaica coalition” (so named because of the party colors involved) looking like the only possibility for Merkel, negotiations could prove tough, especially with the FDP’s opposition towards more economic integration in the euro zone. The SPD’s Stegner said it was time for the political parties to show what their made of.

“Now we have the CDU/CSU, the Greens and Liberals (the FDP). We have four parties that have talked a lot about their ideas for modernizing Germany and now they can show whether they can do that not only in campaigns but in government,” he said.

The only party firmly shut out of any coalition deal is the far-right Alternative for Germany (AfD) party, whose anti-immigration and anti-euro stance has attracted many voters but alienated other political parties. Although the AfD has become the third largest party in Germany, garnering 12.6 percent of the vote, it is viewed as politically toxic and no party will make an alliance with it.

Whatever the make-up of a coalition government, Merkel is now weaker according to Adam Posen, president of the Peterson Institute for International Economics, and could be less effectual in Europe, particularly against a backdrop of proposals – by French President Emmanuel Macron – for greater economic integration in the euro zone.

“The big changes (after the election) are two-fold. First, simply, Merkel is in a much weaker position, even if she makes a coalition with the SDP or ‘Jamaica’ (the FDP and Greens) either way, she’s much more like the Netherlands now with a multi-party coalition, in the German upper house she won’t have a majority now, so she’s in a much weaker position,” Posen told CNBC Tuesday.

“Secondly, if the FDP – the so-called Liberals – are part of the coalition we should expect a slightly harder line on Europe in terms of bailouts which means that some of our aspirations for what a Merkel-Macron (French President Emmanuel Macron) engine could have done for Europe are probably reduced in likelihood or in scope.”

Throughout Tuesday, Germany’s main political parties – including the AfD, Greens, SDP and FDP — are holding meetings and are due to make statements.

Source: CNBC