German Coalitions Suffer Setback Could Spell End of Merkel Era

Now, after a month of talks, German doesn’t know what will happen next. It is an unprecedented moment of uncertainty for a country that prizes stability and predictability above all else. “At the very least,” said Merkel, “it is a day of deep reflection on the path forward for Germany.”



It is difficult to overstate the impact of the collapsed talks. Indeed, for Merkel herself, Sunday night could mark the beginning of the end to her political career after 12 years in the Chancellery. Clearly drained from the exertion of the past several weeks, Merkel said on Sunday night that she would “almost even call it an historical day.” It was the kind of sentence Germany has become used to from Merkel: a bit unpolished and inelegant. But it could end up being true.

German President Frank-Walter Steinmeier now has a key role to play. For the time being, Germany will continue to be governed by the acting coalition pairing Merkel’s conservatives with the center-left Social Democrats. But it is up to Steinmeier, himself a Social Democrat, to navigate the path forward toward new elections – unless Merkel decides to experiment with a minority government.

The third possibility, one being discussed intently on Monday, is a repeat of the current “grand coalition.” Immediately after the election results in September, which saw the SPD plunge to its worst election result since World War II, SPD head Martin Schulz vowed to lead his party into the opposition – the decision that led to the “Jamaica” negotiations in the first place. Now, though, the collapsed negotiations put the SPD in the position of having to revisit that decision. Schulz had been planning to announce his party’s strategy for the future, including a personnel shuffle, on Monday morning, but that press conference has now been postponed. Still, SPD deputy-head Ralf Stegner said on Monday: “There is no mandate for a grand coalition.”

via Spiegel

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza