Germany’s SPD Agrees to Coalition Talks

Germany’s Social Democrats have agreed to open exploratory talks on forming a government with Chancellor Angela Merkel, a party source said, raising hopes for an end to a rare period of political deadlock in Europe’s largest economy.

Leader Martin Schulz met party bosses and recommended that they should go back on a pledge to go into opposition after suffering heavy losses in September’s election, a source at the meeting told Reuters.

They accepted his recommendation, the source said. Party members must still ratify any move to return to government, meaning talks with Merkel are still at least a month away.

Forming a government could take longer still, even as much of the continent looks to Germany for leadership on euro zone governance reform and security policy.

Many SPD members are nervous at the prospect of a renewed “grand coalition” after their previous one with Merkel proved so costly. The source said they would vote at a special congress on Jan. 14.

For Merkel, winning over the SPD is her only realistic chance of securing a fourth term in office, after she failed to assemble an alternative three-way coalition excluding the center-left party.

“Germany needs a stable government because it’s the biggest country in the European Union,” SPD vice-chair Olaf Scholz said earlier.

“Forming governments in a reasonable time is a German trademark, and we shouldn’t risk that trademark,” said Merkel’s conservative close ally Peter Altmaier, warning that the far-right Alternative for Germany party would profit if the uncertainty dragged on.

SPD leaders hope to sell the about-face to skittish members by forcing Merkel’s conservative to concede a raft of popular worker-friendly measures in exchange for their support for a coalition or minority government.

That could slow things further, particularly if the parties seek common ground on immigration.

The SPD wants to retain the right for successful asylum seekers to bring their families – but Merkel’s conservative Bavarian allies, fearing defeat in regional elections next year, are equally adamant that it should be scrapped.

A poll for ARD television showed that 61 percent of voters would support a renewed “grand coalition” between the conservatives and the SPD.

Reuters

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell