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Merkel, center-left reach deal on new German government

By Geir Moulson
Associated Press

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BERLIN: Chancellor Angela Merkel’s conservatives agreed Wednesday to form a new government with their traditional center-left rivals, a coalition that will shift Germany leftward but likely mean little change in Berlin’s approach to Europe’s debt crisis.

Merkel’s Union bloc and the Social Democrats signed their deal to form a “grand coalition” of Germany’s biggest parties after a final round of talks capped weeks of wrangling following Sept. 22 elections.

A potentially tricky hurdle still remains before Merkel can be sworn in for a third term: the Social Democrats are putting the agreement to a ballot of their roughly 470,000 members, some of whom are deeply skeptical about going into government with the chancellor. The result is expected Dec. 14.

“The spirit of this agreement is that we are a grand coalition to master grand tasks for Germany,” Merkel told reporters, identifying the main priorities as “solid finances, secure prosperity and social security.”

The new government will increase spending but, at the conservatives’ insistence, pledged to not raise taxes and to stop running up new debts during its four-year term.

The additional spending is unlikely to satisfy critics abroad, who say Germany needs to rebalance its export-oriented economy by encouraging consumer spending. International economists say that by increasing domestic spending on imports, Germany can help other, weaker members of the 17-country eurozone — an argument Berlin has flatly rejected.

The Social Democrats secured key demands such as the introduction of a mandatory national minimum wage, which Germany is unusual among rich industrial powers in lacking. The 8.50-euro ($11.50) hourly minimum is to be introduced in 2015, though exceptions will be possible for the first two years.

Both sides secured potentially expensive changes to the pension system. The center-left wanted to allow some workers to retire early on full pensions, and the conservatives sought higher pensions for mothers who stayed home rather than working.

In a change championed by the Social Democrats, people born in Germany who also hold a passport from a non-European Union country will no longer have to choose one citizenship — something that will apply largely to the children of Turkish immigrants.

“For them, it will be a great signal that we’re saying, ‘you belong to us and we don’t want to build artificial obstacles,’ ” Social Democrat leader Sigmar Gabriel said.

Merkel has pushed other European countries to get their budgets in order during the continent’s debt crisis and objected to pooling Germany’s debt with that of weaker countries.

On Wednesday, she made clear she was sticking to that line, declaring that “solid finances mean, for our common Europe, placing value on having not a debt union but a stability union.”

The Social Democrats have dropped a demand for a debt-redemption fund. The coalition deal stresses that the new government opposes pooling debt or pooling bank countries’ deposit insurance funds.


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