White Smoke in Berlin? One hurdle less on the way towards a new German

By Bernd Buschhausen, Berlin Office

White Smoke in Berlin? One hurdle less on the way towards a new German Government

The road towards formal coalition talks between Conservatives and Social Democrats for the formation of a new German government is becoming clearer.

On 12 January, participants of the exploratory talks reached a preliminary deal.

Chancellor Merkel and Bavaria’s Seehofer (both Conservative) have declared that exploratory talks should now go to formal coalition negotiations. While the lead Social Democrat Schulz has also recommended the opening of negotiations, the Social Democrats will formally decide on the launch of negotiations at an exceptional Party Conference on 21 January. The party’s base continues to be divided on a new government with the Conservatives.

Some outcomes for key sectors:

The outcome of the exploratory talks, a 28-page document, has been circulated by German media outlets. The document remains vague on most regulatory issues:

Health: Contributions to health insurance are to be financed equally by employers and employees. The proposal of the Social Democrats for a radical reform of the health insurance scheme is, however, for now off the table. It is unlikely to re-appear as a demand should both parties agree to launch formal coalition talks. Equal financing of health contributions of employers and employees had been the rule before 2005, but since then been relaxed. The announced changes in the financing of health contributions are likely to be neutral with regard to the financial revenues of public German health insurances which have a crucial role in deciding on the use of new drugs and therapies.

Energy & Environment: The next government should prepare a roadmap by the end of 2018 for the phasing-out of coal. Climate targets for 2020 (40% reduction of greenhouse gases relative to 1990) have been given up, but ambitions are to meet reduction objectives as closely as possible. Driving bans for diesel vehicles are to be avoided. Agricultural producers are to reduce the reliance on glyphosate. Climate targets for 2030 and 2040 remain in place. A positioning of both Conservatives and Social Democrats against diesel bans was widely expected. A German Court ruling on diesel driving bans is expected for January.

Finance: The introduction of a ‘substantial’ financial transaction tax (FTT) in the EU is to be concluded.  The re-iteration of the demand for a FTT is unsurprising. Since 2009, Germany is one of 10 EU countries which has requested participated in enhanced cooperation on this issue.

So, is this then the start of something new?

The potential partners showed their commitment to driving tangible results: During the exploratory talks, little to nothing was leaked with regards to the content and results of the talks – quite a contrast to the talks conducted for the failed Jamaica coalition. However, the actual decision to take up concrete coalitions negations rests now with the Social Democratic party. And the members of this group are not particularly happy about the results. Thus, nothing is set in stone yet.

But at least we have now a new cliff hanger: How will the Social Democrats decide? Will Merkel manage a new Grand Coalition? Will it work? And for how long?

Interesting times indeed…

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