(Bloomberg) -- Months of soul-searching by Germany’s ruling parties hasn’t pulled Chancellor Angela Merkel’s coalition out of its funk.
After the Social Democrats elected new leaders who pledged a shift to the left, the party wants to eek out concessions from Merkel’s Christian Democratic-led bloc. If that fails, the SPD may make good on a threat to pull the plug on the government, plunging Europe’s biggest economy into political turmoil.
Here’s a guide on how we got here and what the possible scenarios are going forward:
How did we get here?
The coalition was born out of the necessity to end a prolonged stalemate after the 2017 election. Many SPD members didn’t want to enter another alliance with Merkel’s conservative bloc, which is often credited for their policy successes. Both centrist partners are hemorrhaging support as voters turn toward the far-right Alternative for Germany and the environmentalist Greens. That push and pull on both sides heightens tension between the reluctant allies.
Coalition leaders will meet before Christmas to discuss what room, if any, there is to accommodate demands that the SPD has set out as a condition to remain in government. If all sides agree to move ahead with talks, it could still takes weeks or months before any concrete progress is made.
What are the chances of a deal?
So far, both sides seem far apart. The new SPD leaders -- Norbert Walter-Borjans and Saskia Esken -- are making demands that go far beyond what was agreed in the formal coalition accord. They would be very difficult, if not impossible, for the CDU to agree on.
Walter-Borjans called for additional investments of some 450 billion euros ($498 billion) over the next decade, while Esken said that the minimum wage should rise to at least 12 euros per hour.
Both adopted a tone that isn’t conducive to constructive talks, mocking CDU leader Annegret Kramp-Karrenbauer -- who they will have to negotiate with -- and her calls for increased defense spending.
How has Merkel’s bloc reacted?
They were quick to say there won’t be a renegotiation of the coalition contract. They also ruled out a loosening of the balanced-budget policy, a tax on the rich or a reworking of the climate deal sealed in September.
While there are some points the SPD and CDU/CSU could agree on -- accelerating some investments or a more gradual increase of the minimum wage -- the question is whether that would be enough for Esken and Walter-Borjans to satisfy an SPD base expecting a significant shift to the left.
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Why might the SPD stay anyway?
The alternatives are extremely unattractive. If Merkel decides to carry on at the helm of a minority government, it would look awkward for the SPD to withdraw its support for policies it helped put on the drawing board. And if it chooses to continue its support in parliament, then it might as well stay in power by hanging on to its current cabinet posts. If snap elections were held, the SPD would likely lose many seats. In the last election in September 2017, it won 20.5% of the vote but is now polling at around 15%.
Snap election or minority government under Merkel?
If the SPD were to exit government and withdraw its parliamentary support, Merkel could in theory remain in office for some time, though few people think she would be able or willing to head a minority government for long. Snap elections in Germany don’t happen frequently or easily. President Frank-Walter Steinmeier, who would have to dissolve parliament, would be reluctant to call a new ballot. Any path to a fresh election would have to involve a confidence vote in the Bundestag, the lower house of parliament.
What would post-Merkel Germany look like?
Merkel’s succession is wide open. Her party remains the number one political force, with 25%-28% in the polls. But Kramp-Karrenbauer has struggled to build support in her party and beyond. She would be comfortably beaten by Greens co-leader Robert Habeck in a straight vote for chancellor, polls suggest. The Greens, the second-strongest force and pushing hard on the heels of Merkel’s bloc, have said they are open to govern with either the SPD or the CDU/CSU. But the SPD may not even put up a candidate, its new leaders have said.
--With assistance from Patrick Donahue, Arne Delfs, Birgit Jennen and Chris Reiter.
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