Germany's Christian Democratic Union, its Bavarian sister party, the Christian Social Union, and the Social Democratic Party formally began negotiations Oct. 23 on the formation of the so-called grand coalition, which last ruled Germany between 2005 and 2009. The parties hope to have a new government in place by late December. Until then, they will haggle over issues ranging from a new Germany strategy for Europe to the introduction of minimum wages.
Coalition talks will not be without their stresses, but a revival of the grand coalition is likely. Once in place, the coalition would have a relatively easy time getting policies through parliament. In the lower house the coalition, which would control 504 of 631 seats, would face the weakest opposition in decades. In the upper house, which represents the German federal states, the coalition would not have a majority. However, control of the upper house, the Bundesrat, is not as vital because the Bundesrat does not vote on all matters put before parliament, particularly matters concerning the European Union. (Measures that went as far as constitutional change would require the approval of both houses.)
The long-standing rivalry between Germany's two largest parties, the Christian Democratic Union and the Social Democratic Party, is a potential threat to the longevity of the likely future government. Bridging the ideological gap between the Christian Democratic Union and Christian Social Union on the center-right and the Social Democratic Party on the center-left will be a challenge and will lead to numerous coalition disputes, particularly if the economic crisis in Germany worsens considerably.
However, once the grand coalition has defined a common position, it could implement policies with strong parliamentary backing, which will probably prove valuable in the coming years of the European crisis.
Upcoming Issues in Europe
The European Union as an institution will be paralyzed for much of 2014. The bloc will hold elections for the European Parliament in May, and a new European Commission, the union's executive body, will take over in late 2014, stalling decision-making in Brussels.
The European Parliament elections will be particularly important because they will gauge European-wide support for parties representing Euroskeptical and nationalist platforms. It is likely that these parties will do better than in the past, since voters will see the elections as an opportunity to voice their dissatisfaction with the political elite.
One threat to decision-making at the EU level is that Euroskeptics will be inclined to block policies put forth by the member states and the European Commission. Of particular concern will be the right-wing and anti-establishment movements in the United Kingdom, France and Italy, since these countries hold the most seats in the European Parliament after Germany. There is little that Germany can do to mitigate the threat that Euroskepticism poses to the European Union as an institution. Germany will allow moderate parties in Britain or France to adopt more Euroskeptical policies to prevent them from losing votes to nationalist parties. Berlin will probably offer partial support to the efforts that London, Paris and Rome will undertake to assuage the Euroskeptics, such as calling for the reclamation of power from Brussels on immigration control and other matters, in hopes that these calls will remain largely rhetorical and will not challenge the economic aspects of integration.
While the uncertainty surrounding the European Parliament elections is troubling, the likely paralysis of the European Union's institutions does offer Berlin some opportunities. For example, Berlin can float its own ideas for institutional changes to assess domestic and EU-wide support for policies that will likely center on further supranational integration, particularly of eurozone countries.
Fears that the eurozone will break apart have dissipated for now, but the European Union nonetheless will be under pressure from member states and financial markets to make institutional changes. Several countries, including the United Kingdom and Nordic nations, will seek to weaken or freeze aspects of European integration in light of growing displeasure with the effects that stronger integration and delegation of power have had nationally. At the same time, the European Commission and some member states will push for more centralized power and democratic accountability in Brussels and centralized aid (for example, through a eurozone budget) in order to strengthen the eurozone and overcome the structural deficiencies that have generated the current crisis.
The next government in Berlin will likely find itself arguing on both sides at times.
Recurring Themes
A number of important issues from 2013 will continue to occupy European decision-makers next year. On the financial front, the health of banks across Europe as well as further aid to struggling eurozone countries will be on the table. The European Central Bank will assume centralized oversight of the largest banks in the eurozone by late 2014, at which point it will also be clearer how much aid or restructuring the banking sectors need. The important questions that must be solved before restructuring are who will decide which banks need restructuring and where the aid will come from. Berlin will try to keep the decision-making power in the hands of national governments and will call for the respective banking sectors and governments to foot the majority of the bill before providing cross-border aid.
Aid to struggling eurozone countries is likely to follow the same pattern as in the past. Greece, Ireland and Portugal are the most likely to see further forms of financial assistance but only after agreeing to do more to contain government spending. The situation of smaller nations with troubled banking sectors, such as Cyprus and Slovenia, will probably be a part of Germany's EU agenda for 2014 as well. Germany is aware that it will likely have to provide more financial assistance in the next few years and thus will try to couple new aid promises with stronger oversight of national budgets and the strengthening of the eurozone as a fiscal union. Since budgetary oversight has already been enhanced over recent years, the question will be how Berlin envisions better enforcement of the budgetary revisions demanded.
As far as long-term stability in Europe, the lingering unemployment crisis is more worrisome than the problems with sovereign debt and in the banking sector. Unemployment will remain high, particularly in the eurozone periphery, where there could be modest economic growth without substantial job creation. The social and political instability generated by these unemployment levels will be compounded by the intensifying migration within Europe as well as the rising number of immigrants from North Africa and the Middle East.
Berlin has little to offer to mitigate this aspect of the crisis. On the one hand, Germany will try to quell the calls for aid from the periphery of Europe by providing financial and technical assistance to deal with migration and long-term reform to labor markets. On the other hand, since Germany itself will be one of the primary destinations for immigrants, Berlin will be under domestic pressure to ensure that the national social security system is not abused. It will thus be inclined to introduce stronger immigration controls and to crack down particularly hard on illegal labor and immigration (just like other important immigrant destinations such as the United Kingdom or France).
A Reactionary Power
Germany has Europe's largest economy and, as a result, is portrayed as the leader that can shape the European Union's future. However, as the past years have shown, Germany has trouble implementing any sort of grand German strategy for Europe and is largely a reactionary power. This is unlikely to change with the next government for a number of reasons.
The German government understands the significance the institutional integrity of Europe has for the country's economic well-being. The central challenge for Berlin will be using its position as creditor and economic power to strengthen its role in defining the integration process. This will be difficult for Germany to achieve, since other EU members desire to contain German power through EU structures. This will become more obvious when the members of the European Commission are selected.
