German scenarios

Merkel  who has successfully managed to present herself as able to tread a fine line between the willingness to save the Euro and also the resoluteness in defending German taxpayers - is still incredible popular with German voters.

Merkel  who has successfully managed to present herself as able to tread a fine line between the willingness to save the Euro and also the resoluteness in defending German taxpayers – is still incredible popular with German voters.

If the crisis does not deteriorate, Merkel’s re-election chances against the SPD’s Chancellor candidate Peer Steinbrück remain good. This means that Merkel’s CDU and its Bavarian sister party, the Christian Social Union (CSU), are expected to remain the strongest parties at the upcoming 2013 federal elections. However, whether there will again be a centre-right Government depends on a number of factors. Despite the CDU holds a healthy lead over the main opposition Social Democratic Party (SPD) in national polls, the main obstacle to a third term with a centre-right government for Merkel is the weakness of the FDP, which remains at risk of falling short of the 5% threshold for parliamentary representation. The CDU would prefer to remain in office alongside the FDP, but it remains to be seen whether the FDP would be able to surpass the 5% parliamentary threshold. Most of the collapse in the support for the FDP seems to be due to the discontent among liberal-democrat voters as a result of the failure to keep electoral promises, such as reducing the tax burden. According to latest Forsa opinion poll (July 3, 2013), CDU/CSU would gain 41% and the FDP would get 5%. Together the CDU/CSU  and the FDP would obtain a combined 46%. According to the same opinion poll  support for Germany’s Social Democrats has fallen to two-year low: 22%.  That is lower than their 2009 election result of 23%, which was the worst post-war performance for the party. The Greens would get 14 %. Since the SPD and the Green would gain only a combined 36%, that would not be enough for a red-green majority without the Lefts (9% in opinion polls).

The five-party system implies several post-election coalition scenarios.

The First scenario: centre right government. Should the FDP succeed in meeting the 5% threshold, Merkel could count on a 46% of support (since her party the CDU/CSU would gain 41%) and could form another centre-right government.

The second scenario: grand coalition government. On the other hand, considering that there is a possibility that the CDU could not count on the junior ally, FDP, and since large parts of the SPD do not want to enter into a coalition with the Lefts, then Merkel would realistically be able to stay in power only A continuation of Merkel’s centre right coalition cabinet would probably favour the current status-quo. Major changes in the handling of the Eurozone crisis would be unlikely.  Merkel so far has been strongly opposing both the creation of Eurobonds and also the idea of burden sharing or further integration of the Eurozone. If however, the election leads to a more mixed outcome with the only solution being a grand coalition between the CDU and the opposition SPD, there could be a somewhat acceleration towards more integration, particularly on the banking union, but not necessarily on further burden sharing. Yet, it is important to understand that even if Merkel has to resort to the SPD to form a grand coalition cabinet, a total reverse in German foreign policy with regard to the Eurozone  is unlikely. Surprisingly, even among some German conservatives there is growing disillusionment over the lack of ambition shown in new CDU campaign platform. “It isn’t enough to say that Europe has to emerge strengthened from the crisis,” said CDU foreign policy expert Polenz. The CDU, he argues, also has to explain how it intends to achieve this. And he’s not the only one. Indeed, increasing numbers of German conservatives are vexed that Merkel no longer wants to discuss the long-term future of the European Union.

We know she has never been a passionate supporter of European integration. She believes that it was precisely the unrealistic passion for a united Europe that led to the establishment of a common European currency which lacked a solid foundation. However, precisely because Merkel’s Europe-skepticism is driven by considerations that have to do with the Country supposed own national interest, the German Chancellor should know that it is in its country own interest to advance with the process of European integration.  So what we hope for, regardless of who is going to run the Country, is that Germany finally sees the Euro crisis as an opportunity to fix the mistakes made during the creation of the common currency. European reforms cannot be delayed indefinitely. We don’t know yet if Germany’s approach in foreign policy towards Europe will sensibly change  but what we know for sure is that, if Germany wants to continue in the years to come to be classed as a success  economy, it will need to start growing under its own steam—domestic demand will have to replace exports as the driver of economic growth, bringing about a narrowing of the country’s substantial external surplus and a fall in its high domestic savings rate. If all the deficit Eurozone countries were actually to reduce their public deficits without a compensatory increase in German consumption, European domestic demand would undergo a strong decline, which would also affect German exports.

Not only Germany does need the Eurozone, it also need the Eurozone’s peripheral countries to remain in it.

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