Merkel Offered Path to Fourth Term as Resistance Dwindles

(Bloomberg) -
Merkel, Merkel minority
Martin Schulz, head of Germany’s Social Democrat Party, at an election campaign rally in September. (Krisztian Bocsi/Bloomberg)

Germany’s biggest opposition party is ready to begin talks with Angela Merkel on a minority government, offering her a way to restore political leadership in Europe’s biggest economy.

It’s the first sign the Social Democratic Party is ready to help the chancellor stay in office after her talks on forming a coalition with three other parties fell apart. SPD head Martin Schulz, who faces party pressure to go further and disavow his refusal to join a Merkel government, consulted with German President Frank-Walter Steinmeier on Thursday before gathering with other SPD leaders in Berlin to discuss how to move forward.

Two months after an inconclusive election that brought a far-right party into parliament, the impasse has left Merkel stranded even though she won a mandate for a fourth term. With Germany’s political map in flux, her aversion to governing without a parliamentary majority and the SPD’s refusal to be her junior partner for a third time may both be negotiable.

“Of course we want to help Germany, and we haven’t ruled out anything,” SPD lawmaker Karl Lauterbach said in a ZDF television interview. That includes the option of a “grand coalition” with Merkel’s Christian Democrat-led bloc as a last resort, he said.

Schulz, who led the SPD to its worst result since World War II in September, faces increasing pressure within the party to step aside, a move that might help clear the way for a grand coalition.

He is ready to hold talks with Merkel and is prepared to back her in a minority government, though he won’t offer another grand coalition, according to a person familiar with his thinking who asked not to be identified. Schulz and other SPD leaders met later Thursday to discuss the party’s course of action.

“We will have an intense discussion that’s aware of our responsibility,” Manuela Schwesig, a member of the party’s inner circle of leaders, told reporters.

Markets have taken the deadlock in stride, with Germany’s DAX Index gaining 3.3 percent since the election on Sept. 24. The euro rose 0.3 percent to $1.1852 in Frankfurt.

“The economic situation in Germany is simply too stable at this time — even without a new government,” Otmar Lang, chief economist at Targobank in Dusseldorf, said in a note. There’s “no danger that markets will collapse under the current political uncertainties.”

As they weigh engaging with Merkel, the Social Democrats are split between those on the left who see the two coalitions with Merkel as the main reason for the slump in its support and those who spy a chance to push through policies such as expanded health care and reaching out to French President Emmanuel Macron to strengthen the euro area.

Many in the SPD would prefer to stay out of government to prevent the far-right Alternative for Germany, which entered parliament for the first time with 12.6 percent of the vote in September, from becoming the biggest opposition force.

Volker Kauder, Merkel’s parliamentary caucus leader, appeared to pour cold water on the idea of a minority government. Merkel, ruling in a caretaker capacity since she emerged weakened from the election, has signaled she would rather face new elections than govern without a majority.

“If there is no other choice, this option will have to be used, but making policy and day-to-day parliamentary business would be endlessly complicated,” the Suedwest Presse newspaper quoted Kauder as saying.