Germany poised for another grand coalition

Germany has moved one step closer to another grand coalition government after the Christian Democratic Union (CDU) and Social Democratic Party (SPD) announced plans to begin coalition talks next Wednesday.

SPD members will meet on Sunday to decide whether to back coalition talks a month after the federal election left Chancellor Angela Merkel’s CDU five seats short of a majority.

Senior SPD officials said on Monday they would only back this step if the CDU conceded to agree a minimum wage of €8.50. SPD leader Sigmar Gabriel refused to be drawn on the matter yesterday saying Dr Merkel and the CDU "were aware" of his party's positions.

“I wouldn’t go so far as to say we have results but . . . we have the impression that agreement can be reached on all issues of dispute to serve the country and the German people,” he said.

The CDU was equally tight-lipped, though officials said the leaders had reached an understanding on the minimum wage issue in a private meeting.

'Corridor of agreement'
After three rounds of exploratory talks, CDU general secretary Hermann Gröhe said both sides saw a "corridor of agreement" on outstanding issues in upcoming coalition talks which, experience shows, can take up to a month.

Alexander Dobrindt, general secretary of the CSU, the CDU's Bavarian sister party, said both sides agreed the next coalition's priorities would be "growth, financial stability and jobs" – including a "sensible minimum wage deal".

CSU leader Horst Seehofer, the Bavarian premier, has indicated that he could live with an €8.50 minimum wage – once the rate was set by an independent commission and not politicians.

For decades CDU/CSU politicians have refused to back a minimum wage, saying employers and unions are better placed to reach agreements based on sectoral and regional circumstances.

However, a decade after labour market liberalisation, the federal government spends an estimated €4 billion annually topping up wages in Germany’s burgeoning, non-tariff low-wage economy.

Dr Merkel has already convinced her party to back pay floors in sectors where no wage agreements exist but she refused to make any further concessions yesterday.

Other points of dispute include SPD demands for a wealth tax and a merger of private and public health insurance schemes, both rejected by the CDU/CSU.

Bavaria’s CSU is clinging to a new allowance for mothers who care for children in the home; the SPD wants to abolish what it derides as the “stove premium”.

Compromise is likely on other big ticket items such as better pension entitlements for life-long workers and for mothers, demanded by the SPD and CDU respectively.

The other challenge is to divide up the ministries.

Dr Merkel insisted yesterday her party would retain the finance ministry with Wolfgang Schäuble at its head. SPD officials have signalled they would settle for a super-economic ministry.