Merkel fails to form government, markets shrug
Path uncertain for Europe’s biggest economy after jarring collapse of talks
German Chancellor Angela Merkel’s hopes for cobbling together a majority ruling coalition in parliament were struck a devastating, if not predictable, blow Sunday night when the Free Democrat Party walked away from the negotiating table.
“It’s a day at the very least for a profound examination of Germany’s future,” Bloomberg reported Merkel as saying in Berlin after the talks fell apart. “As chancellor, as caretaker chancellor, I will do everything to make sure this country continues to be well governed through the tough weeks ahead.”
The Financial Times writes that “Merkel faces worst political crisis of her career” which has plunged Germany into a “new era of uncertainty.”
Though the FDP was a coalition partner for Merkel in her second term, it was a bridge to far for the pro-business party to agree to demands from the left-wing Green party on issues such as immigration. The far-right, anti-immigration Alternative for Germany party took credit for this.
“It was our resounding electoral success that was breathing down the negotiators’ necks,” AfD leader Joerg Meuthen was translated by Bloomberg as saying on Facebook. It was clear to the FDP that “caving to Merkel’s left-wing/green course quickly will soon lead them back to where they came from: opposition outside parliament.”
“Migration was an absolutely central topic” Merkel was reported as saying, in some ways confirming the AfD leader’s sentiment.
With what we know now, Merkel is now left with two real options: rule at the helm of a minority government or call a new election. A third option would be to convince the center-left Social Democrats to renew the so-called grand coalition, but it is unclear what would bring them to the table after repeated refusals, including from today.
“The starting point for the SPD hasn’t changed,” Ralf Stegner, a senior SPD politician was quoted by FT as saying Monday. “We have no mandate for a renewed grand coalition.” Germany newspaper Bild has reported that the SPD Presidium voted unanimously Monday against a grand coalition and has called for new elections.
There are some questions as to what a new election would mean, with fear of the AfD gaining more ground mixed with some speculation that the FDP could win back votes from the AfD for holding their ground on the immigration issue in talks with Merkel.
European stocks were unfazed by the collapse of the negotiations, which, while not entirely unexpected, was much more conclusive than many predicted Sunday night. The euro is falling Monday morning, as assessment of the damage continues.