What does the collapse of German coalition talks mean for Angela Merkel?

The big divisions are on policy surrounding the eurozone and refugees.

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Germany has been thrown into political chaos after talks between the ruling centre-right Christian Democrats, left-wing Greens and centrist Free Democratic Party collapsed late last night. The FDP's Christian Lindner pulled the plug on negotiations, saying that there was no "basis for trust" between the parties.

Although so-called Jamaica coalitions – black for the Christian Democrats, yellow for the FDP, and green for the, this will shock you, Greens - have governed in the Saarland and are in power in Schleswig-Holstein, at a national level, they are bitterly divided on a number of issues. Compounding the problem, the Christian Democrats themselves are divided between the CDU, which competes in elections outside Bavaria and the CSU, which competes in elections inside Bavaria and is more socially conservative than the CDU.

The big divisions are eurozone policy (on which the FDP wants to take a still more hawkish stance) and refugee policy (the Greens want a more generous policy than Merkel's original, the CSU want less), but it is not clear which divisions sparked Lindner's decision to walk out on talks.

What happens next? Well, this uncharted territory for postwar Germany, but the legal position at least is clear: either a resumption of the grand coalition between the CDU/CSU and the Social Democrats, a minority government or new elections. (Deutsche Welle has a good English language explainer of the constitutional ins and outs if you're so inclined.)

In practice, the SPD fear that another coalition with Angela Merkel would see her take credit for their ideas (see: the German elections of 2009 and 2017) and lead to another record-breakingly bad showing at a general election (see: the German elections of 2009 and 2017).

Although the German economy is doing well and its only pressing problem – the lack of investment in the public realm – shouldn't be too difficult for a minority government to pass, postwar Germany has never had one and Merkel is loath to be the first.

So the most likely outcome – though of course it all hinges on what the president, Frank-Walter Steinmeier, decides to do – are fresh elections. What happens next? Although the poor election result and the break-up of the coalition talks pose tricky issues for Merkel's continuing leadership of the CDU/CSU, she is more popular than her party still and that all-but-guarantees that she can lead them into another contest if she wants to. There are also three possible sources of votes that could change the parliamentary arithmetic fairly decisively.

Firstly, the FDP. If I were advising the FDP I'd be pretty worried that Lindner has achieved what coalition talks failed to do: united the Greens and the CDU/CSU. Both parties are clear that agreement was possible and that Lindner's walk-out was unnecessary. The thing about snap elections is that voters don't like them and that there is a political cost if you are blamed for holding one. FDP voters also knew full well that a coalition with Merkel was on the cards. They might simply vote for Merkel directly this time.

Secondly, the SPD. It's true that they have suffered in coalition, but the troubling question is whether or not the 20.5 per cent they got in 2017 represents an irreducible core or a group that quite liked the grand coalition and may also defect. In the long term, their new leader in parliament Andrea Nahles might be able to attract more left-wing support and recover the party's distinctiveness, but probably not in time for an election in January.

The third factor is the Alternative for Germany or AfD, a party founded by Eurosceptic academics that has since been largely taken over by the far right. (Remind you of anybody?) Since their third-placed finish they've been riven by internal strife and their leader has quit the party. Now of course, the thing about these populist parties, in Europe at least, is that they don't need to be well-run to do well. (See: Ukip in Wales, but the story is consistent across the continent.) But it may be that the AfD does worse this time, whether through direct defection or through differential turnout.

Or of course, voters could return a result basically identical to the one they did in September. The one thing that isn't uncertain is its impact on the Brexit talks: because whoever ends up in power, the German political class is at least united on that.

Stephen Bush is special correspondent at the New Statesman and the PSA's Journalist of the Year. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.