In Stratfor's 2017 Fourth-Quarter Forecast, we said that Germany would spend the final quarter of the year focused on domestic politics as it worked to form a coalition government. As a result, Germany's engagement in EU politics would slow down, preventing any major decision or reform.
Germany has been diligently attempting to move forward with coalition negotiations, but the participating parties are struggling to make headway. On Nov. 16, they missed a self-imposed deadline, and the four parties — Chancellor Angela Merkel's conservative Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU), the pro-business Free Democratic Party (FDP) and the environmentalist Greens — resumed negotiations on Nov. 17.
The process of forming the next German government is complicated, due to the extremely fragmented parliament that the country's Sept. 24 general elections yielded. The center-right CDU/CSU conservative bloc succeeded in receiving the most votes, but it didn't earn enough to govern alone. The center-left Social Democratic Party (SPD), which earned second place, refused to form a grand coalition because it was displeased with its role in the previous government, so the conservatives turned to the centrist FDP and the Greens for a coalition.
On Oct. 20, before the parties could even begin formal negotiations, they started preliminary talks, and it's these discussions that they were hoping to conclude on Nov. 16. Once they reach a broad preliminary agreement, the parties can begin official coalition talks, which allow them to discuss policy objectives and ministerial positions in more detail. But the parties still disagree on several policies.
On migration policy, the Greens oppose a CSU proposal to introduce a yearly quota of asylum seekers and also want to make family reunions easier for refugees in Germany. On energy and environment policy, the Greens want to close many coal plants, while the FDP, the CDU and the CSU are negotiating for fewer closures, which would have less of an impact on the economy. Finance policy is also controversial, as the FDP would like to abolish the solidarity tax that transfers funds from former West Germany to former East Germany, while the other parties only want a slow reduction.
Despite the missed deadline, all parties seem committed to continuing negotiations. Now that talks have resumed, they could last several days. The FDP has said in the past that because the negotiating parties have different positions on many issues, they shouldn't force an agreement. But FDP leader Christian Lindner said on Nov. 16 that they had reached a consensus on many issues, and that the talks hadn't failed just because they had missed the deadline.
If the preliminary talks are successful, then the parties will start official coalition negotiations, a process that could take weeks. If the early talks fail, the CDU and CSU would have to look for another solution. One option would be to try to form a minority government, either with the FDP or with the Greens. The conservatives could also try to reach out to the SPD to form another grand coalition, but that seems unlikely at this point. Finally, they could ask German President Frank-Walter Steinmeier to call new elections. Recent opinion polls suggest, however, that the CDU, which received 32.9 percent of the vote in September, is polling at around 31-32 percent, meaning early elections may not bring Merkel's party any closer to forming a government.
Germany will need a bit more time to resolve its coalition problem and form a new government. For the rest of Europe, that means Berlin will be unable to address Continental concerns. Until Germany's disparate political parties come to an agreement, major decisions and reforms at the EU level remain unlikely.