Merkel and Schroeder fightfor right to be chancellor

19 September 2005

BERLIN – Chancellor Gerhard Schroeder and challenger Angela Merkel on Monday battled over who would become Germany’s next leader – despite vowing to open coalition talks – after weekend elections left both of their blocs without a majority.

Political strife in Europe’s biggest economy made financial markets jittery amid concern that reforms seen as crucial to revive sluggish growth and cut unemployment would be watered down.

In an outcome with no post-1945 precedent, both Schroeder and Merkel claimed the right to form a government by seeking coalition partners among the smaller parties.

Preliminary official results for Sunday’s election gave Merkel’s Christian Democratic alliance (CDU/CSU) a narrow plurality of 35.2 per cent against 34.3 per cent for Schroeder’s Social Democratic Party (SPD).

But in a break with tradition, SPD officials insisted the result made the SPD the biggest single party in parliament given that the CDU/CSU is comprised of two separate parties: the CDU and its Bavarian CSU sister party.

Schroeder said he had thus won the right to remain chancellor.

“Our task is to implement the will of our entire party – and we will do this,” said Schroeder to cheers of supporters at the SPD’s ‘Willy Brandt Haus’ headquarters in Berlin.

But Merkel remained by her claim of victory.

“We are the strongest party – we have a clear mandate to set up the government,” said Merkel.

The mass-circulation newspaper Bild summed it up with its Monday headline: ‘Chancellor War!’

Both Schroeder and Merkel said they were ready to open talks aimed at coalition with all parties expect for the former communist East German Left Party which won 8.7 per cent.

The smaller parties – traditionally the kingmakers in Germany where coalitions are the rule – swiftly became the focus of attention Monday.

Among possible German governments are:

– A ‘grand coalition’ of Merkel’s CDU/CSU and Schroeder’s SPD. The question is who would be chancellor. There is speculation such a government may only be possible if Merkel and Schroeder are dumped by their respective parties and fresh candidates are put forward.

– A coalition comprising Schroeder’s current SPD-Greens with the addition of the Free Democrats. The problem here is that FDP chief Guido Westerwelle vows not to form such a government and refuses to hold talks with Schroeder on the issue.

– A ‘Jamaica coalition’ which would bring together Merkel’s CDU/CSU with the FDP and the Greens – the name is because the black-green-yellow official party colours match the Jamaican flag.

In a report to investors, Commerzbank said from an economic standpoint the three ‘Jamaica’ parties were not that far apart on key issues. But the bank warned sharp foreign policy differences would likely prove a major hindrance to forming a such coalition.

Indeed, Greens Foreign Minister Joschka Fischer poured cold water on the idea by expressly ruling out serving under a chancellor Merkel.

The FDP won 9.8 per cent and the Greens got 8.1 per cent in Sunday’s election.

Reacting to the vote, Germany’s main DAX stock index declined by 0.81 per cent and the euro hit its lowest level in a month, falling to 1.2131 dollars.

“The knee-jerk reaction in financial markets is likely to be negative … A prolonged period of uncertainty could rattle financial markets further,” warned Elga Bartsch, a European economist with the bank Morgan Stanley.

Adding to concerns, the final election result could still depend on 219,000 voters in a constituency in Dresden in the east of the country, where voting has been delayed until October 2 as a result of the recent death of a right-wing extremist candidate.

*sidebar1*The CDU/CSU has gained 225 seats in the Bundestag against 222 for the SPD, according to the election authorities.

But up to three extra seats could be added to the parliament from Dresden under Germany’s complex proportional representation system. This could, in theory, produce a hung parliament.

The newly elected parliament must hold its first session by October 18. Schroeder remains in office as acting chancellor until the new head of government is voted in.

Commerzbank predicted Merkel and Schroeder’s parties would be forced into a grand coalition which would likely muddle through with reforms needed to cut 11.4 per cent unemployment.

Morgan Stanley’s Bartsch agreed and predicted “reform gridlock.”

“Let’s face it: Germany has opted for standstill,” she said.

DPA

Subject: German news, German elections