By Mathew D. Rose, a free lance journalist in Berlin
In Germany, Angela Merkel’s Christian Democratic Party and its sister party the Bavarian Christian Social Union are inexorably heading for a “grand coalition” with the Social Democrats. This would give the coalition well over a two-thirds majority in both houses of parliament, making constitutional changes a mere formality. What does this mean for Germany and what will its effect be upon the European Union and a resolution of its current economic crisis?
This grand coalition does not bode well for the average German. One only needs look back at the last grand coalition formed in 2005. What should have been a compromise between Merkel’s centre-right Christian Democrat bloc and purportedly centre-left Social Democrats ended up an incontrovertible neoliberal program unfavorable to most cititzens. The best example was the two percent increase in the sales tax in the Christian Democrat bloc’s platform, the most contentious issue of the 2005 election. The Social Democrats castigated this increment, which would principally penalize wage earners, as the “Merkel Tax”. As the grand coalition was formalized, it was announced that the sales tax would not be increased by two percent, as sought by Merkel, but, astonishingly, three percent. Other changes initiated by the past grand coalition were an rise in the retirement age by two years, and a reduction of corporate and inheritance taxes, to name a few.
This volte face by the Social Democrats was something many voters and party faithful have never forgiven. In the 2009 elections, after four years of grand coalition, not only did the Social Democrats suffer their worst post-war election result, 23 percent, but the party had by then lost almost a fifth of its members. This was the second major haemorrhaging of leftists (the first during the the Social Democrats’ neoliberal policy under Gerhard Schroeder) the party had suffered within ten years. One does not have to look far for an explanation. The party had jettisoned its social credentials.
After its 2009 election disaster, the party tried to rebuild its leftist image. The predominant features of its latest election platform included raising taxes for the rich to finance much needed public investment sacrificed in the name of austerity and a minimum wage in a country where a quarter of employees work in the low pay sector. This helped to raise its results slightly, but most of its leftist voters appear to have abandoned the party, with its leftist election rhetoric and rightist policy, forever.
This does not seem to interest the party grandees in the least. They give the impression of being more concerned about their personal wealth than the welfare of their constituents. Since the era of Gerhard Schroeder one prominent Social Democrat politician after another has found a well paid job in companies that they had provided political favours for while in office. Many prominent Social Democrats of the Schroeder era, including the former chancellor himself, whose egregious venality is an embarrassment for the party, are glaringly absent at party conventions.
Peer Steinbrück, who was the Social Democratic chancellor candidate in last month’s election didn’t even wait to retire from active politics, but cashed in while still a member of the Bundestag. As Finance Minister in the last grand coalition he had generously bailed out German banks, letting the taxpayer foot the bill. Following the election debacle of 2009 he was reduced to being a simple member of parliament. But he was a seldom seen there, missing important debates and legislation votes, preferring instead to give highly remunerated talks, mostly for financial institutions, earning around €1.5 million ($2 million), until the election campaign terminated these appearances.
Thus it comes as no surprise that the first prominent Social Democrat to broach the topic of a grand coalition shortly after last month’s election, Johannes Kahr, stipulated only one condition: That his party receive as many minister portfolios as the triumphant party of Ms. Merkel. For Kahr and many other Social Democrats political issues are – well – not an issue. Even before the grand coalition has been finalized, new prominent posts are being created in the Bundestag and purportedly in the government to provide for the rapacity of the Social Democrats, this ostensibly includes an increase in the number of ministers.
On the other hand, coalition backroom dealing has hardly begun and the Social Democrats have already backed off from taxing the rich. Having limited its deficit by law, however, there is little room to manoeuvre for increased government spending for education and infrastructure, unless funds are taken from other programmes, which could translate into further cuts in social spending. The question of a minimum wage seems to be on the best way to being watered down. According to election promises this was supposed to be 8.50 Euros ($ 9.40), the Social Democrats however never said when this should be introduced into law and in what form. Merkel’s Christian Democrat bloc may well acquiesce to a transaction tax, another policy demand of the Social Democrats, but then let it be scuppered by the EU. After that there is not terribly much left of the Social Democrats’ platform
For Europe things do not look much better. There is little help to be expected from the Social Democrats, once a party promulgating European solidarity. Even in opposition the Social Democrats have unceasingly supported Ms. Merkel’s EU financial policy.
Of the Social Democrats’ “Ten essential points“ for negotiating with the centre-right Christian Democrat bloc, Europe landed at the end of the list, which says a good deal concerning priority: “We want to secure and increase growth and employment in Europe. This can only succeed when all EU nations, especially those within the Euro zone, couple a strategy for sustainable growth with sustainable financial policy.” Little compassion there. In fact, it sounds uncommonly similar to the current policy of austerity being pursued by Ms. Merkel. Here as well, the Social Democrats appear to backing away from their demand for the introduction of Eurobonds.
Ms. Merkel is however vigorously working towards an EU financial pact that would provide cash support for financially troubled nations, but at the cost of sacrificing their fiscal autonomy. That is why she needs the Social Democrats. A change of this dimension would not only probably necessitate a change in the Treaty of Lisbon, which is part of the constitutional basis of the European Union, but of the German constitution as well. This would be particularly difficult with regard to providing German taxpayers’ money for a fund to support what have been up to now portrayed as profligate and work shy Southern Europeans. With the Social Democrats Ms. Merkel would not only have enough votes in both houses of parliament to alter the German constitution, but would enjoy the moral support of Social Democrats of providing other Euro nations with a cash contribution via an EU investment fund.
Many EU nations are however tiring of austerity and increasing German hegemony. Thus the German government has prepared a Plan B, a pared down version. This would involve an intergovernmental agreement with the 17 nations in the Euro currency group. The purpose of this agreement, which would go a major step further than the existing “Euro Plus Pact”, is to institutionalize the regulation of the labour market, as well as the welfare, health, and the state retirement pension systems in these countries. This would impose the same conditions as already exist for Euro nations currently being bailed out – for everyone and all the time. It would also vitiate the necessity of removing democratically elected governments to push through austerity measures. As recompense a multi-billion Euro fund that would provide financial aid for investment, would be on offer. To enforce this new financial regimen, an official full-time head of the Euro currency group is apparently in the planning. This would take decision making power from the EU Parliament and give it to a newly created institution independent of the EU.
This alternative strategy would entail the implementation of an intergovernmental pact, similar to the European Stability Mechanism. Euro zone nations that opt out would maintain their fiscal and economic autonomy, but those who are in need of cash would have little alternative, but to yoke themselves to German dictates. There is the question of how those nations that sign up and cash in can later leave such a pact, especially due to a change of government with different solutions for the current financial crisis.