Merkel's road to a third term could be rocky
BERLIN (Reuters) - The German election is still more than two months away but for many the vote's final chapter has already been written.
Angela Merkel, it is widely assumed, is cruising to a third victory at the polls. When she wins, the thinking goes, there will be few, if any, major changes to German policy.
The vote could well play out according to script. Merkel's conservatives hold a dominant 16-19 point lead over the next strongest party, the centre-left Social Democrats (SPD), and recent polls suggest she may be able to renew her centre-right coalition with the Free Democrats (FDP) after September 22nd.
But should she fail to secure a parliamentary majority with the FDP, the election aftermath is likely to be far messier than many casual observers of German politics presume.
In this scenario, Merkel would probably have to pay a very heavy price in terms of policy concessions to stay in the Chancellery.
And her exit could not be ruled out. In a note this week, J.P. Morgan analyst Alex White put the chance Merkel will be booted out of office after the election at 20 percent.
"If the election result produces neither a centre-left or centre-right majority, which seems very likely, then we will witness the most difficult, protracted and dramatic coalition negotiations in the history of the Federal Republic," Heribert Prantl wrote in an editorial in the Sueddeutsche Zeitung daily.
"The winner takes it all? That may work for Abba but not in German politics," he wrote, referring to a song by the Swedish pop band. "The chancellor will not necessarily be the one that comes out on top."
Under the German political system, leaders must secure a majority in the Bundestag lower house of parliament to rule.
Merkel's conservatives may be far ahead of the SPD in opinion polls, but they are unlikely to win more than 40 percent of the vote on election day, meaning she will have to find a partner to stay in power.
If she can't do that with the FDP, which may not reach the 5 percent threshold to enter the Bundestag, the likelihood is that she turns to the SPD, with whom she ruled in her first term between 2005 and 2009.
The problem this time around is that the SPD is dead-set on avoiding a "grand coalition" under Merkel.
That's because the party is still haunted by their previous partnership, when Merkel co-opted many of her rival's policy ideas, coaxed away its supporters and left the SPD with its worst election result in the post-war era four years ago.
Senior members of the party are vowing to prevent a repeat in September -- even if it leads to months of post-election uncertainty.
"Anyone who believes the SPD is going to jump right back into a grand coalition doesn't know the mood in the party nor the power of the states," said a leading figure in the SPD who spoke to Reuters on condition of anonymity.
After a string of regional victories in recent years, the SPD now governs in 13 of Germany's 16 states. The party's regional barons are particularly worried about another "grand coalition" and are exerting huge pressure on the SPD leadership to explore other options after the vote.
"There are a lot of people in our party that would prefer to see Merkel partner with the Greens than do another grand coalition," the SPD leader said.
Despite the reluctance, Frank Decker, a political scientist at Bonn University, believes the SPD will not be able to avoid partnering with Merkel if she fails to get her preferred centre-right majority.
That's because all other coalition combinations seem far-fetched.
POUND OF FLESH
With her decision to pull out of nuclear power after the Fukushima disaster in Japan, Merkel removed the biggest hurdle to a partnership with the environmentalist Greens, a combination that has been tried at state but never at the federal level.
But the cultural divide and policy gap between the parties, particularly on economic issues, are seen as too big to overcome.
The same holds true for a so-called "traffic light" coalition between the SPD, Greens and FDP, or what Germans call a "Jamaica" coalition between the CDU, FDP and Greens, because the colours of the respective parties match those of the Jamaican flag.
An additional variant involving the SPD, Greens and far-left "Linke", or Left party, has been definitively ruled out by the SPD. And the option that has some in Merkel's entourage worried -- a minority government of the SPD and Greens, with the tacit support of the Left in parliament -- is also seen as a no-go in stability-obsessed Germany.
Still, if the election result is not clear-cut, the expectation is that the major parties will sound each other out on most of these combinations.
Everyone will be talking to everyone, meaning talks on forming a new government could stretch well into November, as they did in 2005 when incumbent Gerhard Schroeder initially refused to concede defeat to Merkel because of her razor-thin margin of victory.
If the SPD does buckle and link up with Merkel again, the consensus is that it will demand -- and eventually get -- its pound of flesh in terms of policy concessions.
This could lead a new Merkel government to take a tougher line on banks, push up spending and raise taxes on high earners, even if she has ruled this out during her campaign. On the margins, it could also lead to a more pro-growth approach in Europe.
"The SPD will try to find one theme that they can really force on Merkel," said Peter Loesche, professor emeritus at Goettingen University. "Taxes is a good place to start. Merkel will have no other alternative."
A poll this week for public television station ARD showed that 81 percent of Germans expect Merkel to remain chancellor after the vote, compared to just 13 percent who see her SPD challenger Peer Steinbrueck taking power.
But the complexities of coalition-building and the possibility that other parties, like the anti-euro "Alternative for Germany", make it into parliament, mean that Merkel may have a bigger fight on her hands than is commonly assumed.
"This won't be as easy as it looks," said a top aide to the chancellor. "If we don't get a majority with the FDP, it's going to be messy. It will be very, very difficult."
(Editing by Philippa Fletcher)
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