The "hidden charms" of a Grand Coalition

[Marvin Gandall <marvgandall@xxxxxxxxxxxx>]

The most sophisticated analysis of the German election so far has come from
Der Speigal, which says the electoral impasse - far from being a
disappointing setback for German capitalism, as most mainstream and many
left analysts contend - is an opportunity to have the parties provide cover
for each other in restructuring the economy in common. Both favour, in
differing degree, scaling back Germany's health, pension, unemployment, and
welfare benefits, reducing corporate taxes and regulation, and weakening the
unions and collective bargaining. The social democrats began implementing
this program while in office. For the SDP, as Der Speigal notes, a coalition
would allow for "a continuation of Gerhard Schröder's 'Agenda 2010' reform
package, but without Schröder's name attached to it...", while the CDU could
escape a potential confrontion with the unions, who would "roll up the
flags" they were threatening to unfurl if the party governed on its own.
"Softening the current course of reform", which the SPD promised to do
during the campaign, would be "impossible" in what the paper describes as
the "hidden charms" of a Grand Coalition. The parties were already in an
"informal grand coalition" in parliament, it says, and the only threat to a
more formal agreement to govern jointly would be SPD fear of losing support
to the Left Party and CDU concern about defections to the FDP on its right.

MG
-----------------------------

The Hidden Charms of a Grand Coalition
Der Speigel Online
September 19 2005

After the election stalemate on Sunday, everything points to a grand
coalition. But can the two major parties reform Germany? And who would lead,
Schröder or Merkel?

Could the best thing for Germany be to have both major parties share power?
The candidate could not have answered the question any more clearly. A grand
coalition? "Won't happen," said Angela Merkel.

That was before the election. Whether her insistence will survive long
afterwards is up for debate. What party leaders had vilified only days
before the election as a "catastrophe" (Markus Söder, Christian Social
Union) or "monstrous" (Ludwig Stiegler, Social Democratic Party) now seems
to be the only clear consequence of Sunday's surprising vote. Not that
anyone can say who'll be chancellor.

With some distance from the poll confusion, though, the new political
reality may not be so bad. German political elites were calling cooperation
between the conservative CDU/CSU and the left-leaning SPD a "blockade
alliance" or a "paralysis coalition" just a few day ago, but now a few
experts are discerning the subtle and hidden charms of a grand coalition. "A
grand coalition can also be a grand success," declared Jürgen Falter, a
political scientist from Mainz.

How would it work, though? How would the two major parties split up the job
of governing? The first advantage the CDU can offer the SPD is a chance to
keep its reputation as protectors of the welfare state; so the upshot might
be a continuation of Gerhard Schröder's "Agenda 2010" reform package, but
without Schröder's name attached to it and without Green accents in energy
and environmental policy.

Germany would then have a government that serves its people's need for
continuity. Softening the current course of reform -- which the SPD promised
to do late in the campaign -- would be just as impossible for a grand
coalition as the radical reconstruction of labor and tariff laws recommended
by the business-friendly Free Democratic Party. The unions, which had
threatened "undreamed-of" mayhem (IG-Metall Chief Jürgen Peters) if the
conservative opposition was successful, can safely roll up their flags.

During the last session of parliament, in fact, an informal grand coalition
has already cobbled together certain important agreements, like changes to
the health-care system, government subsidy cuts, and the infamous
welfare-reform bill known as Hartz VI. A real grand coalition would keep
moving in the same direction.

It might also improve the Hartz IV package, gently, by ending failed
employment measures, and by giving the harsher free-market experiments
suggested by the FDP no serious chance. Both the CDU and SPD, for example,
have already said during the campaign that older unemployed Germans might
not have to be kicked so quickly off welfare.

And there would be no tax revolution: Soak-the-rich schemes like those
recommended by the SPD would be just as impossible as radical tax reforms
recommended by the CDU's financial expert, Friedrich Merz. Big changes would
be out of the question. But it does seem possible that a grand coalition
might attempt a fundamental rearrangement of business taxes.

A council of experts has presented a plan to Schröder's cabinet for
business-tax reform, so the broad outlines already exist: A trend toward
lowering business taxes on the state level would continue on the federal
level, to lure more business to Germany. (The thoery is that a job-creating
corporation should pay a lower tax rate than the average worker or
employee.) Sole proprietors might then get to choose whether they want to be
taxed as individuals or as corporations. This idea appeals to CDU
politicians like Michael Meister as well as the business-friendly wing of
the SPD.

What might dampen the parties' reformist spirit is realizing that too much
might weaken their political base. If the SPD goes along with more
welfare-cutting initiatives, it will lose votes to the Left Party. If the
CDU is seen to sell out small-business owners or high-earning bureaucrats or
corporate employees, they'll migrate to the FDP.

For example: Certain conservative reforms suggested by the CDU/CSU during
the campaign -- pro-family measures, or partial privatization of
nursing-home insurance -- would be unthinkable for an SPD that wants to
improve its image as the party of social welfare after the grief of its
Agenda 2010 reforms. What has a much better chance of winning is the
bipartisan idea of strengthening the welfare system through general taxes,
instead of raising specific contributions by employees and businesses. The
CDU already suggested this method during the campaign: Unemployment
insurance should be lowered by two percent and then paid for by raising
sales tax by 2 percent. If the SPD flogged this idea as "bad policy for 35
million people" during the campaign, that can be dismissed as propaganda.
Social Democrats have discussed similar plans in the last few months.

Which means that a coalition of the two major parties might govern
successfully -- at least for the time being -- if only to fix the most
urgent problems, like reconstructing the German social system.

"Grand coalitions are make-shift solutions," says Falter, the political
scientist, "but sometimes they're necessary."