Amid market rout, Merkel ready for coalition compromise for a stable govt

Must not lose sight of the important points, when we look at the turbulent stock market developments of the last few hours, said Merkel

Chancellor Angela Merkel called on Germany’s prospective coalition parties to compromise, pointing to turbulence on global stock markets as adding urgency to talks to end the country’s political impasse. 

After more than four weeks of coalition negotiations between her Christian Democrat-led bloc and the Social Democratic Party, Merkel faces the most serious deadline yet in her bid for a fourth term. The deadlock, two days after a Sunday target came and went without a deal, comes as first Asian and then European markets tumbled, sending a gauge of world stocks toward the biggest three-day slide since 2015.

We must not lose sight of the important points, when we look at the turbulent stock market developments of the last few hours,” Merkel said ahead of decisive talks in Berlin. “We live in troubled times.”

With many points in a draft government pact already agreed, SPD leaders are holding out for selling points to present to their divided base, which will have the final say in a membership ballot. That increases pressure for concessions by Merkel’s bloc to cajole SPD members into renewing the alliance that’s governed Europe’s biggest economy since 2013.

‘Painful Compromises’

“All of us will have to make painful compromises,” Merkel said, pointing to open issues such labor and health-care policy as well as ensuring Germany’s ability to play a role on the global stage. “I’m willing to do this if we can ensure that the advantages outweigh the disadvantages.”

Germany’s benchmark DAX index fell 3.6 percent at the open in the biggest decline since June 2016 as the global equity rout extended on Tuesday. The S&P 500 plunged 4.1 percent on Monday, erasing its 2018 gain, while the Dow Jones Industrial Average sank 4.6 percent, the most since 2011.

German political negotiations went into overtime on Monday as the SPD seeks to curb the use of temporary work contracts and end health-care advantages for the country’s small minority of privately insured patients.

“It’s crunch time,” Andreas Scheuer, general secretary of Merkel’s CSU Bavarian sister party, told reporters before talks resumed in Berlin. “Germany needs a stable government. We know that we have to come to an agreement today. Everything else would be indefensible.”

Uncertainty Reigns

Merkel, 63, has governed as acting chancellor since her Christian Democratic-led bloc won an inconclusive national election in September. Her attempt to form an unprecedented alliance with the Free Democrats and the Green party failed in November.

While that collapse brought the SPD back to the bargaining table, many members are wary of another tie-up Merkel, blaming two previous stints as her junior partner for the party’s electoral decline to a post-World War II low.

Any coalition pact will be put to a vote by the SPD’s more than 440,000 members. A rejection would force Merkel to consider governing without a stable parliamentary majority or put Germany on track for another election, which polls suggest would turn out largely like the last one in September.

Merkel’s bloc and the Social Democrats agreed on a preliminary blueprint last month that provoked protests by SPD activist factions. An SPD party convention on Jan. 21 backed formal coalition talks with a 56 percent majority after party head Martin Schulz pledged to seek concessions on migration, labor and health care. What role he might play in the new government is unclear.

Carsten Schneider, a Social Democrat lawmaker who’s involved in the talks, said Tuesday on ZDF television that he expects negotiators to discuss the allocation of ministries among the three prospective alliance partners on Tuesday. Decisions on who’ll be minister in Merkel’s next cabinet will be taken “later,” he said.