Merkel’s hand weakens ahead of coalition talks after state loss

Bloomberg

German Chancellor Angela Merkel heads into potentially laborious talks this week to form a national government weakened after her Christian Democratic Union suffered a defeat in Volkswagen AG’s home state.
Three weeks after Merkel’s CDU won the federal ballot, her party posted its worst election result in Lower Saxony since 1959 and lost in the state to the Social Democrats. The SPD, which currently governs the state with the Green party, came from behind to secure 37.3 percent of the vote, compared with 33.4 percent for the CDU, according to projections published by public broadcaster ARD.
The late surge by the Social Democrats to become the largest party in the state for the first time in 19 years marked a reversal for the SPD, which suffered its worst result since World War II in the Sept. 24 national vote. The result saps confidence for the CDU as Merkel begins complex coalition talks at the national level with the pro-business Free Democratic Party and the Greens on Wednesday. The chancellor will discuss the results on Monday in Berlin.
“The debate about CDU losses will solidify just as she is about to enter difficult talks,” Carsten Nickel, a Brussels-based analyst at Teneo Intelligence, wrote in an email. “The backdrop will be noisy at times, but the goal remains firmly in sight” to form a multi-party government.
Merkel’s CDU has suffered losses as many voters turn to the insurgent far-right Alternative for Germany party, or AfD, adding to pressure on the chancellor — particularly from her beleaguered Bavarian allies, the Christian Social Union — to adopt more conservative stances. That could further complicate talks at the national level with the Greens.

DIFFICULT TALKS
“It’s above all a new alarm signal,” Andreas Scheuer, the CSU’s general secretary, said of Sunday’s results. “What we have to negotiate this week will be a difficult piece of work.”
It was the Social Democrats’ first outright victory in Lower Saxony since 1998, when state premier Gerhard Schroeder was elected chancellor. Even though the CDU was the biggest party in the last election in Lower Saxony, the SPD and Greens managed to forge a coalition almost four years ago.
“It’s a great evening for the Lower Saxony SPD — we were lying 12 percent behind,” state premier Stephan Weil told reporters in the state capital of Hanover. “In Lower Saxony, we carried on undaunted.” The loss for the CDU halts a string of victories this year — in three state elections in the spring and then in the national election last month.
The vote in the state, a region of 7.8 million people in northwestern Germany, held up coalition talks in Berlin as parties campaigned. The Social Democratic victory also contrasted with a shift to the right in Austria, where an election put the center-right People’s Party under Sebastian Kurz in position to form a coalition with the far-right Freedom Party.

DIESEL CHEATING
As the CDU’s poll lead faded over the past six weeks, VW’s cheating on diesel emissions became a campaign theme. Merkel’s candidate, Bernd Althusmann, went on the attack by saying he’d turn over one of the state’s two supervisory-board seats at VW to an outsider. That was rebuffed by Weil, who’s said the cheating, which came to light two years ago, originated long before he became state premier in 2013. Merkel has pledged to keep diesel cars on German roads for years to come and rejected a suggestion in a newspaper interview this week that Lower Saxony give up its 20 percent voting stake in VW to address investor concern about the scandal and reduce political influence over the automaker. That same love of stability likely made voters stick with Weil on Sunday.
Weil called an early election in August when a Green Lawmakers defection to the CDU cost his coalition its one-seat majority in the state legislature. Even though Merkel’s party was well-placed to win in the state, the SPD premier successfully seized on the issue, accusing the CDU of political machinations. Their poll advantage evaporated over the last month.
“You have to recognize that there wasn’t the mood for change that we so fought for,” Michael Grosse-Broemer, the CDU’s parliamentary whip in Berlin, told ARD.