Merkel’s bid to form new German govt collapses

Bloomberg

German Chancellor Angela Merkel’s bid to form a new government failed, raising the prospect of fresh elections in Europe’s largest economy and casting doubt on the future of its longest-serving leader.
A month of coalition talks
collapsed in dramatic fashion
just before midnight on Sunday as disputes among a grab-bag of disparate parties over migration and other polices led the Free
Democrats to walk out.
Merkel, whose 12 years in office have made her an anchor for the European Union in times of crisis, said she’ll stay on as acting chancellor and consult with Germany’s president later on what comes next. Relying on a minority administration with shifting
alliances to pass legislation over the next four years would run counter to her promise to provide a stable government.
“It’s a day at the very least for a profound examination of
Germany’s future,” Merkel, 63, told reporters in Berlin. “As chancellor, as caretaker chancellor, I will do everything to make sure this country continues to be well governed through the tough weeks ahead.”
Merkel can now ask President Frank-Walter Steinmeier to order what would be the second national election since September, most likely in the spring, or form a minority government headed
by her Christian Democratic-
led bloc. Both scenarios would push a country that’s had just eight leaders since World War
II into uncharted territory. “Europe has lost another illusion: Germany is no longer the role model of political stability,” said Carsten Brzeski, chief economist at ING-Bank AG.
Merkel has already put Germany’s euro policy on hold until a new government is formed. The common currency weakened as much as 0.6 percent, the most in three weeks, before rebounding against the dollar. The DAX index of German stocks pared losses after touching a seven-week low.
“A chance has been missed to go beyond ideological boundaries and agree realistic solutions,” Eric Schweitzer, head of Germany’s DIHK chamber of industry and commerce, told the Deutsche Presse-Agentur newswire. “But the DIHK is confident that all responsible parties will ultimately be capable of finding sensible compromises.”
Merkel’s biggest setback since she first won the chancellorship in 2005 follows unusually contentious exploratory talks. Policy disagreements on immigration, climate and energy proved so entrenched that even Merkel, once dubbed “the queen of the backrooms,” couldn’t bridge them.
FDP chairman Christian Lindner said the draft agreement to enter into formal coalition talks was riddled with “countless contradictions.” Lindner has called for a “turnaround” plan for Germany’s economy that includes larger cuts in income taxes
and more business-friendly measures. The FDP also wants
to allow countries to leave the euro in an orderly way without quitting the EU.
“On the big questions, there were no concessions” from the other parties, Nicola Beer, Free Democrat general secretary,
said on ZDF television. “The topic was: is the overall direction right, do we have a common vision of what kind of policy should be done in this country over the next four years?”
Disagreements over limiting migration dogged the talks from the start. It’s a measure of the
fallout from the last election, which saw the anti-immigration Alternative for Germany enter parliament with 12.6 percent
of the vote while Merkel’s bloc posted its worst performance since 1949.
Many former voters of the CDU and its Bavarian CSU sister party switched allegiance to Alternative for Germany, which ran against the political establishment and Merkel’s liberal asylum policy in particular.
During the last campaign, the chancellor defended her support for open borders during the refugee crisis in 2015 and 2016, saying allowing about a million asylum seekers into Germany was the right thing to do.
Merkel could still seek the support of the Social Democrats, the junior partner in her last government, though SPD leaders insist they aren’t interested in another alliance after the party’s worst electoral defeat in seven decades. Andreas Scheuer, general secretary of the Christian Social Union, Merkel’s Bavarian allies, said he was disappointed because potential coalition parties had narrowed many of their differences when the FDP pulled the plug.
“These will undoubtedly be
difficult weeks for our country,” Scheuer said. “We must now reach clarity on how we want to lead our country into the future. Our citizens want Germany to have a stable government.”