20 Sep 2017

Berlin and Brexit. The German election on Sunday will be critical to British politics

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The British party conference season opened in Bournemouth on Sunday (and where Sir Vince Cable addressed Liberal Democrats yesterday) and will move through Brighton, Torquay, and Manchester before ending three weeks hence with the SNP in Glasgow. In policy terms, however, the most important moment of this period will not take place in any British location but across Germany on Sunday.

The election there seems certain to ensure Angela Merkel will remain as Chancellor but it is less clear who will be her coalition partners. The identity of her eventual allies will make a real difference to the instincts of the next German administration towards the Brexit negotiations with the United Kingdom and that in turn will have a major impact on the ultimate UK/EU settlement.

That Mrs Merkel is strolling to a fourth term in office is indisputable. Her popularity was tested by her decision two years ago to allow around one million refugees into her country but she appears to have emerged almost unscathed from the episode. There was a brief month or so earlier this year when the Social Democrats (with whom she has been in an uneasy coalition since 2013) adopted Martin Schultz as their candidate for Chancellor and acquired a big bounce in the opinion polls, but all of that momentum has now been eradicated.

Mrs Merkel’s party, the Christian Democratic Union, and its sister party in Bavaria, the Christian Social Union, are now consistently 10-15 percentage points ahead of the SPD and in some surveys have had an even larger advantage. This huge lead is very largely the result of a robust economy (some 80% of voters are satisfied with the state of it) and the sentiment that Mrs Merkel, albeit the most spectacularly unspectacular of politicians, is something of the safest pair of hands in a disturbingly dangerous and unpredictable world. To that extent, the likes of Donald Trump and events such as Brexit have played in to her hands. This will be a quite personal victory. It will strengthen her hold over German politics and through that reinforce her command over the EU.

Who will be her coalition partners?

In order to win seats in the Bundestag a political party either has to secure at least 5% of the party list vote or win at least three constituency seats, in which case it will be awarded seats according to its national percentage of the vote even if this is below that 5% threshold.

This year it seems likely that no less than six parties (seven if you regard the CDU and CSU as separate) will clear that hurdle. These are the CDU/CSU, the SPD, the Greens, the Free Democrats (FDP), the Left Party (which has its roots in the old East German Communists) and Alternative for Deutschland, a Eurosceptic, anti-immigration force not unlike UKIP in Britain. Such a large number of parties in the Parliament makes the formation of coalitions innately complicated. A further twist is that the two largest parties are in agreement that neither the Left Party nor the AfD are acceptable in office.

At the outset of 2017, therefore, the state of the polls and the character of the parties involved meant that the working assumption was that the electoral arithmetic would doom the CDU/CSU and the SPD to working together again in another loveless ‘Grand Coalition’. If the present polls prove right, however, this is no longer an inevitability. It is possible that the CDU/CSU and FDP will both do well enough to form a majority administration between them or, probably more plausibly, the maths will open the door to an ideologically unusual combination of the CDU/CSU, the FDP and the Greens.

Indeed, this ‘Jamaica’ option (named after the colours of the parties concerned - black, yellow and green - which match the flag of that island) is probably, on balance, the most credible outcome. It has been foreshadowed by the formation of precisely such a government in Schleswig-Holstein, after a regional election there in May where agreement on a common programme was reached smoothly. In either scenario, the FDP, which was in coalition with the CDU/CSU from 2009 to 2013 but failed to secure 5% of the vote in 2013 and hence lost its national parliamentary representation, would be back in power while the Social Democrats would find themselves back in opposition.

Why is the FDP so important?

The Free Democrats are often described as being akin to the Liberal Democrats but if so would be very much in the Nick Clegg camp within that party. They are essentially classical Liberals who favour free markets in the economy and free choice in social matters. They are the force in German life which is most sympathetic to privatisation and most strongly in favour of homosexual equality. They have the closest relationship of any party to the German business community.

While basically pro-EU they can be critical of decisions taken by the European Commission which impose more regulation on industry and have a minority faction which is as Eurosceptic as it is permissible to be in mainstream, respectable German society. In office, assuming that they are the second largest party in a Jamaica outcome (which seems likely), they would be keen to assume the position of Foreign Minister and take one of the major economic portfolios as well. Their 38-year-old leader, Christian Lindner, could thus find himself catapulted from relative obscurity to a ringside seat on Brexit.

This would be an enormous relief to Theresa May, Philip Hammond and David Davis. While the FDP disapproves of the UK’s decision to leave the EU, as liberals they believe in the right of a country or people to make that decision. Highly unusually in post-war German politics they have at times supported the use of referenda on major issues. Their close links to the business community means that they will reflect the aspiration of that lobby that nothing should be done as part of the Brexit process that might damage the interests of German exporters simply to score political points. Michel Barnier will be well aware of their policy preferences and can be expect to adjust to them. The chances of there being a comparatively civilised Brexit dialogue would increase, not least because the FDP would reinforce and support Mrs Merkel if she seeks to marginalise Jean-Claude Juncker (the German Chancellor is not thought to be the biggest fan of the Commission President). Put simply, the silent prayer of every UK politician or official involved with Brexit every night before the polls close in Germany on Sunday should be: “Dear God, please put the FDP into government”.

What about the Greens?

The ideal result in London would be a straight-forward CDU/CSU and FDP agreement. A Jamaica alliance involving the Greens would, nonetheless, be entirely acceptable. The Greens simply do not have strong views on Brexit and do not regard it as a priority. If the FDP wanted to make it one of their pet causes in office then so be it, that would not bother the Greens who would concentrate on their core environmental agenda.

Although associated with the left and at one stage led by people described by others as ‘watermelons’ (green on the outside, red on the inside), those currently at the helm of the party have an idiosyncratic ideological heritage, as has the wider green movement in Germany. A CDU-FDP-Green Cabinet would have its tensions but Brexit would not be one of them.

The release of the exit polls in Germany on Sunday will therefore be a matter of intense interest elsewhere. Even if the numbers strongly indicate that a particular coalition option is favoured, it will take at least a month of hard bargaining (possibly more if the Jamaica scenario, untested at the national level, is in pole position) before an administration and an agenda emerges. This means that it is unlikely that there will be a full new German government in place at the time of the next EU Council meeting in mid-October, a gathering that is to ask whether ‘sufficient progress’ has been made in the UK/EU talks so far to move on to a debate about the future relationship. This is one of a number of reasons to suspect that a decision will be deferred until mid-December. There should be a new German Cabinet by the time of that encounter. And it will be the real audience for the address that Mrs May is set to deliver about the UK and the EU when she speaks in Florence, Italy, on Friday.

Tim Hames
Director General, BVCA



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