BERLIN: Chancellor Angela Merkel clinched a coalition deal with the Social Democrats (SPD) yesterday that rolls back decade-old reforms of the German welfare state but preserves Berlin’s strict approach towards struggling European partners.
The agreement, spelled out in minute detail in a 185-page policy document entitled “Shaping Germany’s Future”, was struck two months after Merkel emerged victorious from an election but fell just short of a parliamentary majority. The result forced the popular 59-year-old Protestant pastor’s daughter from East Germany into negotiations with the arch-rival SPD, with whom she ruled in an awkward “grand coalition” during her first term from 2005-2009.
The SPD is still smarting from that experience, and its leadership has agreed to put the new deal to a vote of the party’s 474,000 card-carrying members, adding an element of uncertainty to Merkel’s goal of having a new government in place by Christmas.
“We entered negotiations with very different ideas, and that is why things took a little time,” Merkel told a news conference, sitting between SPD Chairman Sigmar Gabriel and Horst Seehofer, leader of the Bavarian Christian Social Union.
Gabriel said he was sure a “broad majority” of SPD members would back the deal in the mail-in vote, the results of which are due to be published on December 14.
All three politicians praised the atmosphere in the talks, with Gabriel and Seehofer joking with reporters about whether they could now address each other with the informal “du” in place of the formal “sie”. “Perhaps that changes after you win the poll of your members,” quipped Seehofer.
The deal was greeted with a sigh of relief by investors, who pushed the euro currency to a four-year high against the Japanese yen and a one-month peak versus the US dollar.
It was also welcomed by officials in Brussels and other European capitals. The lengthy talks have delayed movement on major European reforms, including progress on “banking union”, an ambitious project designed to prevent a recurrence of the euro zone’s crippling debt crisis.
“It’s positive news,” Italian Prime Minister Enrico Letta told reporters in Rome. “A lot of time has passed and there’s a need for a German government as soon as possible.”
Merkel stood firm against SPD demands for tax hikes on the rich, but to clinch the deal she agreed to introduce a minimum wage of 8.50 euros per hour, which some economists have warned could push up unemployment, particularly in eastern Germany.
To reduce that risk, the parties agreed to phase it in over a period of years, with exceptions allowed until 2017.
Reuters
