Merkel’s bid to end gridlock hangs on SPD vote

Bloomberg

Chancellor Angela Merkel reached a preliminary accord with the Social Democrats to end Germany’s political gridlock, moving closer to a fourth term and defying domestic critics who say her time is running out. The next hurdles are a key vote by her reluctant SPD partners later this month and then finalising the deal in another round of talks.
After a marathon of more than 24 hours of negotiations, leaders of Merkel’s Christian Democratic Union, her Bavarian sister party and the Social Democrats hammered out an agreement that outlines a possible alliance. The 28-page blueprint, largely aimed at winning over wary SPD members, calls for Germany and France to bolster the European Union and respond to President Donald Trump’s move to slash corporate taxes in the US.
“We are convinced that we need a new start for Europe,” Merkel told reporters at SPD party headquarters in Berlin. “I am therefore not concerned that we will be able to find reach new solutions here, especially with France.”
In addition to strengthening the EU, the parties agreed on modest middle-class tax cuts, including a phaseout of the “solidarity levy” for rebuilding ex-communist eastern Germany. In a nod to the Bavarian affiliate of Merkel’s party, the plan limits refugee arrivals to 220,000 a year.
Still, uncertainty remains almost 16 weeks after her party won an inconclusive federal election. In addition to the vote by SPD rank and file, cabinet posts — including the powerful role of finance minister — have yet to be negotiated.
Merkel has governed with the SPD in an alliance of Germany’s two biggest parties for eight of her 12 years in office.
A rerun signals their lack of a “big bold vision,” while probably providing “a mild fiscal stimulus,” said Carsten Brzeski, Ger-man chief economist at ING-Diba in Frankfurt.
“For the main actors in these negotiations, a collapse could have marked the beginning of the end of their political careers,” he said. “It’s a breakthrough that leaves a bad taste in the mouth.”
In Merkel’s second attempt to restore leadership in Europe’s dominant country, the main hurdle to a rerun of the so-called grand coalition of Germany’s two main parties now lies with the Social Democrats. The party at first refused to extend their alliance with Merkel after suffering their worst electoral def-
eat since World War II, and SPD leadership will put the result of the exploratory talks to a party convention on January 21.
“It was clear to us from the beginning that it wouldn’t be easy,” Social Democratic leader Martin Schulz told reporters in Berlin. “I think we produced excellent results.”

AGREEMENT HIGHLIGHTS
Pledges not to increase overall tax burden on citizens Prepared to contribute more to EU budget Calls for “fair taxation” for Internet companies such as Google, Apple and Amazon Targets introduction of substantial European financial transaction tax Wants building of nationwide Gigabit network by 2025 May increase clean power share to 65% from 38% Plans to subsidize construction of 1.5 million new apartments
The progress in stabilizing Germany’s government propelled the euro to a three-year high versus the dollar, trading at $1.2135 as of 4:30 p.m. in Frankfurt. The German parties’ glacial place in setting up a new administration is testing the patience of voters who gave Merkel’s Christian Democratic-led bloc the most votes in the Sept. 24 contest. Merkel, 63, has been acting chancellor since, putting most policy making in Europe’s biggest economy on hold.