Merkel to launch government with centre-left rivals

BERLIN - Agence France-Presse

German Chancellor Angela Merkel (R) shares drinks with designated Defence Minister Ursula von der Leyen after the signing of the new "grand coalition" government agreement between the conservative CDU/CDU union and the social democratic SPD party at the German Parliament on December 16, 2013. AFP photo

After months of political limbo, German leader Angela Merkel will this week start governing with her centre-left rivals, an odd couple to jointly tackle challenges from eurozone woes to the country's green energy shift.

Merkel, whose conservatives triumphed in a September 22 vote but fell short of an absolute majority, is to be sworn in for a third term Tuesday, launching a 'grand coalition' with her traditional rivals the Social Democrats (SPD).
 
A newspaper cartoon hinted at potential trouble ahead, with Merkel in a bridal dress and incoming SPD vice chancellor Sigmar Gabriel as the groom, pledging "until death do us part" -- with Merkel clutching a dagger and Gabriel packing a gun.
 
Teaming up with an overwhelming majority against a tiny opposition of the Greens and far-left Linke, Germany's two big parties will have the power to drive through major reform but also face the threat of reaching only bland compromises.
 
"Now the grand coalition has to show what the adjective 'grand' stands for," commented the conservative daily Frankfurter Allgemeine Zeitung (FAZ). "Grand mutual mistrust? Grand, leaden paralysis? Or grand deeds after all?" "The third Merkel government could ... leave its mark on the republic," it added. "But it is more likely that the Germans will get from this government what they want from it: social-democratic politics with a bourgeois face." Merkel on Monday pledged "solid finances, secure prosperity and social welfare" and said that "a grand coalition is a coalition for grand tasks -- we want to make sure that the people in 2017 are better off, even better off, than they are today".
 
Despite past campaign-trail barbs and the battle looming ahead of 2017 elections, the new partners have pledged sensible cooperation and vowed pragmatism in their left-right government of Europe's biggest economy.
 
Merkel keeps her trusted lieutenant, Finance Minister Wolfgang Schaeuble, to continue Berlin's tough loans-for-reform stance toward troubled eurozone countries and as the watchful guardian of the German public purse.
 
The SPD gets the foreign ministry, where Frank-Walter Steinmeier returns as Germany's top diplomat, while the CDU's rising star Ursula von der Leyen, a worldly high achiever and mother-of-seven, takes over the defence ministry.
 
Gabriel is charged with running a new "super ministry" combining the energy and economy portfolios, to push forward Germany's nuclear exit and renewable energy drive, while putting a lid on ballooning costs and sticking to EU rules.
 
The new government has a more leftist hue after the SPD, despite a poor election outcome, drove a hard bargain in coalition talks, winning trophy concessions such as a national minimum wage and higher pension benefits.
 
Despite initial misgivings, the SPD party base signed off at the weekend on the coalition deal that will see the 150-year-old blue collar party again govern with powerful Merkel, as it last did from 2005 to 2009.
 
"The centre-left SPD has turned an election defeat into a near victory, putting their imprint on Germany's domestic policy agenda for the next four years," said Berenberg Bank's chief economist Holger Schmieding.
 
But Schmieding also echoed business concerns that softening tough decade-old labour and welfare reforms in rapidly ageing Germany will harm its still humming economy in future.
 
"These policies will weaken Germany over time," he wrote. "They are the opposite of what Germany is urging other European countries to do. But due to its strong starting position, Germany can afford such costly policies for a while." Carsten Brzeski, chief economist at ING-DiBa, said the new cabinet line-up "shows that two of the most important policy topics for the coming years will be highly influenced by the Social Democrats: the introduction of a minimum wage and the energy transition." He added that Merkel and Schaeuble "will remain in the driving seat of the other well-known 'hot topics': fiscal and European policies, including the eurozone crisis management." "The next government will be a coalition of two parties almost at eye level," added Brzeski. "This distribution of power could eventually turn out to be a blessing, at least if it leads to a more stable coalition."