Germany’s Chancellor Merkel advances on forming new government

LONDON (ICIS)–German Chancellor Angela Merkel’s Christian Democrats (CDU/CSU) and the Social Democrats (SPD) have agreed a “compromise paper”, paving the way to begin official negotiations to renew their “grand coalition” government, they said on Friday.

Merkel has been trying to form a new government for more than three months following last September’s inconclusive federal elections. Since then, she has been carrying on as acting chancellor amid much uncertainty about the future policy direction of Europe’s largest economy.

In a webcast press conference on Friday, SPD leader Martin Schulz lauded the compromise paper as an “excellent result” for his party.

The compromise is still subject to final approvals by the two parties. An SPD party congress is due to make a decision next week.

Many SPD members remain sceptical about renewing the coalition. They blame having been in a coalition with Merkel for the party’s bad results in the September elections, and directly after the elections Schulz had ruled out a renewal.

However, Schulz changed course after Merkel failed late last year to form an alternative coalition government with the Liberals and the Greens.

Business leaders said that with the compromise paper, the probability of Germany finally getting a new government has risen, which was important for business as it would put an end to the ongoing uncertainty in Berlin.

They also welcomed the parties’ clear commitment to the EU.

However, they criticised that in their compromise paper the parties failed to provide for meaningful reforms of Germany’s tax system and for lower corporate taxes.

In that respect, Germany was falling behind countries such as the US, the UK and France, which all announced a reduction in tax for companies, said Eric Schweitzer, president the German industry and commerce chamber (Deutsche Industrie- und Handelskammer).

German chemical producers’ trade group VCI welcomed that the compromise paper envisaged tax incentives for research and development (R&D) by small and medium-sized companies (“Mittelstand”).

However, VCI criticised that the parties failed to address the rising costs of the country’s transition towards renewable energies (“Energiewende”).

VCI now hopes that the SPD congress will approve and that official coalition talks will begin quickly, said the group’s general manager, Utz Tillmann.

“What is crucial is that the final coalition agreement has a strong industrial-political core in order to make Germany internationally competitive for companies,” Tillmann said.

“This includes, above all, a better tax environment for innovation and investment, a new start for the financing the Energiewende, and the modernisation of the digital and the conventional infrastructure”, he said.

Germany needed, as quickly as possible, a government that will be able to act and that has programmes in place to strengthen industry, he added.

Pictured: Merkel and Schulz in Berlin on Friday
Source: Xinhua News Agency/REX/Shutterstock