BERLIN, Germany - On Friday, the German Chancellor Angela Merkel unveiled a coalition deal between her conservative bloc and the Social Democrats and hailed a “new dawn for Europe.”
Merkel said in a statement that she was confident Germany will find “common solutions with France” on taking the European Union forward.
After ending marathon talks with SPD leader Martin Schulz, Merkel said she was now confident that Germany would find “common solutions with France” on taking Europe forward.
Since last September, Europe’s top economy is facing a political stalemate and on Sunday, Merkel locked heads with other political leaders in a bid to form a stable government.
The leaders headed to the negotiating table for a six-day period, months after their bid to form the government in November failed.
Since then, the post-election stalemate in Europe’s biggest economy has lasted over three months and had been focussed on 63-year-old Merkel’s bid to avoid facing voters again or governing without a majority.
The collapse in talks put German decisions on euro-area policy to government spending, migration and social programs, on hold.
The stalemate undermined the chancellor’s authority both at home and abroad, and held up critical business in Europe and weakened Germany’s international reputation.
Before the talks began earlier this week, Merkel told reporters in Berlin, “Our intention is to work very swiftly, very intensely. I’m going into these talks with optimism, though it’s clear to me that a huge amount of work lies ahead.”
Hours before the make-or-break talks to renew her alliance with the SPD began, Merkel said Germany needs a stable government to tackle “enormous” tasks ahead.
Merkel has governed with the SPD for eight of her 12 years in office in a “grand coalition” of Germany’s two biggest parties.
On Friday, Schulz said, “We are determined to deploy Germany’s full economic and political power to turn Europe once again into the great project that this community of nations is.”
However, experts pointed out that the coalition, is by no means a done deal.
Resistance to an alliance with the conservatives runs strong in the SPD’s rank and file, who will get to vote on any final coalition agreement.
Further, formal negotiations on a grand coalition can only start once the SPD party conference in Bonn on January 21 provides a green light.
Meanwhile, skepticism remains strong among Social Democrats, who feel the party lost its identity in the previous grand coalition between 2013 and 2017.
While the SPD has recorded some significant successes in the past, including the introduction of a minimum wage, yet many party members felt that Merkel got all the credit for them.
Post the election last year, the SPD had firmly ruled out reviving its alliance with Merkel, but was forced to reconsider after her attempts to form an unprecedented three-way coalition with the liberal Free Democrats and environmental Greens collapsed in November.
Friday’s agreement between the CDU/CSU and SPD goes some way to addressing Macron’s call for deep reform of the eurozone.
It claims that the EU should deploy budgetary funds to stabilize economies and support structural reforms in the single currency area, and that these could form the basis of a future eurozone “investment budget.”
Further, reports pointed out that the document also supports turning the European Stabilization Mechanism, the eurozone’s crisis rescue fund, into a European Monetary Fund.
It further said that Germany is “prepared to pay more into the EU budget.”
The president of the European Commission Jean-Claude Juncker called the coalition deal a “big win for Europe.”
Meanwhile, a think tank, the Centre for European Policy, said the agreement was an “important signal” for Germany’s European partners, especially the French President.
It said, “Many of his ideas are reflected in [it].”
However, it has warned that the idea of using EU funds to support structural reforms “reduces the responsibility of eurozone countries and could lead to a situation where ESM funds are disbursed without conditions.”
Meanwhile, Friday’s talks resulted in some success for all sides.
SPD reportedly secured promises of a massive investment in education and digital infrastructure.
It also achieved a reduction in the solidarity surcharge, a special tax to fund economic development in eastern Germany, for people on low and middle incomes.
Talks also ensured that the state pension, which is projected to fall to 47.6 percent of average lifetime salaries by 2020, will be fixed at its current level of 48 percent until 2025.
Further, employers can now contribute more to employees’ health insurance schemes.
Meanwhile, Merkel’s CDU/CSU resisted pressure from the SPD for a tax increase on higher earners, and ensured Germany will continue to balance its budget.
It has also promised 15,000 more policemen, part of a package of measures to improve law and order.
The CSU, Merkel’s Bavarian sister party, on the other hand has pushed through tight restrictions on immigration.
As part of the talks, the parties have agreed that the number of refugees entering Germany should be limited to a range of 180,000 to 200,000 a year.