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In bed with dracula – A grand coalition with Angela Merkel

01/10/2013

The SPD as the oldest political party in Germany has demonstrated, again and again, that it knows when to assume responsibility and that it is able to put party-political interests behind the national good. After the recent elections it has to do so again but it must clarify what the national interest is. Providing a majority for Angela Merkel in the Bundestag is not what would serve Germany in the future.

Merkel is popular and German public opinion favours a Grand Coalition between the CDU/CSU and the SPD. But popularity is a fleeting glory that often ends in tears. Germany has weathered the Euro crisis better than others and superficial observers believe it is because of Merkel’s policies. However, the truth is that the German labour market has improved because of the structural reforms made by the Schröder government and, more importantly, because economic growth has been stimulated by the inflow of money and capital from the peripheral member states in the Euro Area.

 

Olivier Blanchard, now chief economist at the IMF, once spoke of the danger of “rotating slumps” in a Euro Area without a centralized macroeconomic government, but their mirror images are “rotating booms” and Germany is at the moment the prime beneficiary of Southern misery. Merkel has achieved “success” by first pouring petrol into the fire of the financial crisis when she resisted helping Southern economies, and then by further undermining confidence in the euro when she claimed German superiority and thereby implicitly condemned southern inferiority. No German Chancellor since World War II has been more unashamedly nationalist. Not surprisingly in this climate, Germany’s nasty nationalists have felt encouraged and have regrouped in the new party Alternative für Deutschland (AfD) which is now gaining ground.

 

Yet, every boom is followed by a bust. German economists claim that the previous bubble in the Euro Area’s South has “masked underlying structural weaknesses”, but hardly anyone asks what the present boom is masking in Germany. The awakening will not be pleasant and responsible policy-makers should prepare today for the preservation of social justice and political stability after the mirage is over. Only social democrats could do so.

 

Political stability is important. Yes, Merkel has been elected three times but the price has been high for her partners and for German democracy. Social democrats lost 2.6 million votes when they governed in a Grand Coalition under Merkel; the Liberal FDP has lost 4.2 million this time. A coalition with Merkel means going into bed with Dracula. The loss of blood is dramatic and persistent: with 25.7%, the SPD is still at its second worst election result since 1949 (the worst was four years ago with 23%). It has not used the time in opposition productively.

 

Similarly, it is unlikely that the liberal party will return to power soon. More probable is that it will lose right wing members to the AfD, which will turn into a right wing party like the FPÖ in Austria or the Front National in France. The left wing liberals of the FDP may be absorbed by the Greens who will emerge as the party of long run ecological sustainability, civil liberties and pluralistic tolerance. In the meantime, the SPD will be in a Grand Coalition responsible for unpleasant reforms such as pension reforms and budget balance, while Die Linke, the former communist party of East Germany and now the third largest group in Parliament, will continue to undermine the SPD’s credibility as the defender of social justice. The long run consequences for Germany’s democracy will be severe. The Christian Democratic Union (CDU/CSU) will cement it hegemonic position, the extreme right will be in Parliament, and the SPD will become more and more marginalized. Even if it may not disappear yet, as did the Italian or Japanese Socialist Parties, it may soon be reduced to third rank.

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