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German Coalition Talks Collapse On FDP Walkout

German Chancellor Angela Merkel finds herself left with rather stark alternatives as coalition talks came to nothing after the FDP (Free Democratic Party) walked out of the negotiations citing irreconcilable policy differences. Christian Lindner, the leader of the FDP, commented that “The four discussion partners have no common vision for modernization of the country or common basis of trust,” adding.


“It is better not to govern than to govern badly.”


Talks between the four parties, Merkel’s CDU, the Christian Social Union, the FDP and the Green Party aimed at forming the next government failed to agree on the possible makeup, jokingly referred to as the “Jamaica Coalition”.


The term “Jamaica” arose from the similarity between the symbolic colors of the four parties and the colors of the Jamaican flag.


Coalition negotiations had been on-going since the September elections that saw Mrs. Merkel’s CDU emerge as the biggest party in the Bundestag but without the overall majority necessary to form a new government. The second largest party, the Social Democrats (SPD) made it clear from the onset that they would not be seeking entry into a coalition with the CDU. This would have left the right-wing AfD as the official opposition party in the Bundestag, granting them substantial political benefits, something the SPD were adamant they would not allow.


The SPD’s refusal left the Jamaica coalition as Mrs. Merkel’s only path to power, outside of a minority government, something the German Chancellor herself had ruled out.


Migration policy was the most divisive issue in the coalition talks as Germany has allowed over 1.2 million migrants to enter the country between 2015-16. The backlash against this open border policy was precisely what paved the way for the exponential rise in support for the AfD, resulting in a far-right party represented in the Bundestag for the first time in over 50 years.


This is unfamiliar territory for Germany as it marks the first time since the Second World War that elections have failed to produce a government.


The Jamaica coalition is left stranded, and the only options remaining outside of fresh elections seem to be a minority government with either the FDP or the Green Party. Commenting on the possibility of forming a minority government in an interview with German broadcaster ZDF (Zweites Deutsches Fernsehen), Mrs. Merkel said she was “skeptical.”


“Germany needs a stable government that doesn’t need to search for a majority for every decision.”


Given Germany’s complicated parliamentary process, February 2018 seems to be the earliest snap elections could be called, requiring Germany’s President, Frank-Walter Steinmeier to dissolve the current parliament and install an interim Chancellor before any call for new elections.


While never a political gambler, Mrs. Merkel seems ready to risk new elections. The September results gave the AfD parliamentary representation and 13.3 percent of the seats in the Bundestag. What the support may look like after new snap elections remains to be seen, but the AfD is the primary beneficiary from the uncertainty in German politics.


This uncertainty has also had an effect on the markets with the EUR and the Dax both falling on news of the collapse in the coalition negotiations. This comes as a compound problem for the common currency, already under pressure from the stagnation of the Brexit talks.


The EU needs some good news and the results of the Jamaica party have been anything but. Good cheer is in short supply, and Christmas really can’t come quick enough.


This article is for educational and informative purposes only and should not be considered as investment or trading advice.