Germany: Coalition talks come to a deadlock; what options are on the table

Reports — By on November 21, 2017 at 5:26 PM

Global Economic & Market Outlook – Focus Notes (Tuesday, November 21, 2017)

Germany: Coalition talks come to a deadlock; what options are on the table

The three-party Jamaica coalition talks involving Angela Merkel’s Conservative Christian democratic political alliance CDU/CSU, the liberal Free Democratic Party (FDP) and the Greens fell apart late on Sunday November 19 after the chairman of the FDP Christian Lindner unexpectedly pulled out of negotiations. Apparently, after four weeks of exploratory talks, the negotiators failed to reach a compromise on a number of key issues, including: (i) immigration. The CDU/CSU reportedly insisted on a 200,000 ceiling per year on immigrants while the Greens wanted unconditional permission for family members to follow refugees to Germany. As a compromise, the FDP proposed the option families to be allowed to follow a refugee once he was integrated in the German society and able to financially support them; (ii) climate protection. Among others, the FDP opposed a request by the Greens for closing down coal mining; and (iii) fiscal policy. The FDP reportedly insisted on eliminating the “solidarity tax”. With coalition talks coming to a deadlock, Germany is now left with four possible options:

1. Resumption of coalition talks. The attitude of the chairman of the FDP does not necessarily mean that he favors new elections. Instead, his decision to pull out of negotiations may suggest an attempt to push for further advantages in the negotiations. Admittedly, in the absence of other options, it is possible the Greens and the CDU/CSU to make further concessions to get the FDP back to the negotiation table.

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