Europe Faces a Hamstrung Germany After Merkels Coalition Bid Fails

Angela Merkel may be running out of road after 12 years at the helm in Germany.

With the chancellor’s attempt to form a fourth-term government in disarray, Merkel’s once unquestioned ability to steer Europe is waning as the region’s biggest economy heads into uncharted waters and possibly a protracted political stalemate.

The breakdown in coalition talks late Sunday — amid disputes over migration and other policies between a grab-bag of disparate parties — raised the prospect of fresh elections, which probably would be held next spring. Relying on a minority administration with shifting alliances to pass legislation would run counter to Merkel’s promise to provide a stable government.

However she attempts to move forward, European decisions on everything from Brexit and Greece to Russian sanctions and French President Emmanuel Macron’s proposals for strengthening the euro region will now be hemmed in by Merkel’s weakened role as a caretaker chancellor.

“What it means is that Germany is pulled inward because it has to manage its political transition,” said Daniel Hamilton, executive director of the Center for Transatlantic Relations at Johns Hopkins University in Washington. “So the state of drift in Europe continues and now Germany, which has been the stabilizer of the last number of years, is part of that.”

The euro and German stocks were little changed, sustained by optimism over the region’s economic momentum. The single currency slid less than 0.1 percent to $1.178 at 12:25 p.m. in Berlin, rebounding from as low as $1.172. The benchmark DAX index added 0.2 percent.

Read more: German Economy Seen Coasting Even as Coalition Talks Crumble

Merkel, 63, said she plans to stay on as acting chancellor and will consult with Germany’s president later Monday on what comes next.

Changing Landscape

Her options for stitching together a majority government appear drastically narrowed, and she sounded uncertain about the way ahead.

“It’s a day at the very least for a profound examination of Germany’s future,” Merkel said in Berlin after the Free Democrats, her second-term partner between 2009 and 2013, pulled out of the coalition talks. “As chancellor, as caretaker chancellor, I will do everything to make sure this country continues to be well governed through the tough weeks ahead.”

Merkel’s biggest setback since she first won the chancellorship in 2005 makes her the latest victim of a surge in anti-establishment politics across large parts of Europe, driven in part by a migration crisis that pushed questions of national identity to the forefront and upended her non-ideological approach to governing.

“It was our resounding electoral success that was breathing down the negotiators’ necks,” Joerg Meuthen, leader of the anti-immigration Alternative for Germany, or AfD, said on Facebook. While Merkel’s Bavarian allies “looked into the abyss” of losing power in their home state, it was clear for 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.”

Germany has had only eight chancellors in the seven decades since World War II, but Merkel’s move to take in more than 1 million asylum seekers in 2015 and 2016 spurred a backlash in elections held in September. Her bloc took its lowest share of the vote since 1949 despite a booming economy, while the AfD surged into parliament with 12.6 percent of the vote. Other parties have said they won’t partner with the AfD in any government.

“Migration was an absolutely central topic” that dogged the coalition talks, Merkel said.

Defying Expectations

FDP chairman Christian Lindner said the draft agreement to enter into formal coalition talks was riddled with “countless contradictions.” Policy disagreements on immigration, climate and energy proved so entrenched that even Merkel, once dubbed “the queen of the backrooms,” couldn’t bridge them.

The chancellor could potentially now turn for support to the Social Democrats, the junior partner in her last government, though SPD leaders have said they aren’t interested in another alliance.

Polls suggest new elections would produce roughly the same outcome as the September ballot, though that may change once voters assess the new level of uncertainty. And Merkel, a former East German physicist whose rise to the top began with the fall of the Berlin Wall 28 years ago, has made a career of defying expectations and making surprise shifts, including Germany’s exit from nuclear power after the Fukushima reactor disaster in Japan.

“She’s clearly diminished, but it might be too early to say it’s the end of the era,” Hamilton said.

    Source: http://www.bloomberg.com/

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