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A cliffhanger in Berlin, and why it matters to us all

For one month Angela Merkel tried in vain to form a coalition government in Germany. Negotiations between the Christian Democrats (CDU), their sister party the Bavarian Christian Socialists (CSU), the Liberal Democrats (LDP) and the Greens proved difficult. Around midnight on Sunday the head of the FDP, Christian Lindner, announced that the negotiations had failed and that his party was out.
Merkel was left with three options — work with the Social Democrats (SPD), who are at this point not up for the challenge, head a minority government or ask for new elections. She was quick to announce that she preferred new elections to a minority government. The ensuing political uncertainty was more akin to political scenes in Rome than Berlin. It is now up to Germany’s President Frank-Walter Steinmeier, to guide the country through these uncertain times. He instructed Chancellor Merkel to head a caretaker government while he tries to figure out if some sort of ruling coalition is possible. If not, it will eventually be up to him to call for new elections. The German constitution makes this process difficult; it does so with intent, because it was written against the backdrop of the tenuous carousel of elections and revolving governments during the Weimar Republic.
A Jamaica coalition (nicknamed after the three party colours of black, yellow and green) was always going to be difficult, especially because the Greens and the FDP are diametrically opposed on many issues, as is the conservative CSU. The stumbling block was in the end the FDP’s reluctance to accept a continuation of the so-called “solidarity tax,” which is designed to help the states from the former East Germany achieve economic parity with the Western states. The CSU was not budging on its quest for an upper limit on refugees, and the LDP and the Greens could not see eye to eye on environmental policies, especially if and when coal-fired power stations should be taken off the grid. Merkel was not able to forge consensus and is weakened as a result. On the German talk shows, there is real anger among the negotiating politicians. The blame game is on and fingers are firmly pointed at the Chancellor.  
The chickens have come home to roost for Merkel. She ruled Germany in coalition with the FDP until 2013 and then in a “grand coalition” with the SPD. In both cases it did not go well for her coalition partners. In 2013 the FDP did not surmount the 5 percent hurdle to obtain seats in the Bundestag, and in last September’s elections the SPD suffered their worst result in the postwar history of Germany; no wonder their leaders are wary of working with Merkel. New elections are not without risk, though; all parties are worried that the ultra right-wing, populist Alternative fuer Deutschland (AfD) will make further inroads — they achieved 13 percent in September. It also remains to be seen whether the FDP will be viewed as heroes for walking out, or accused of dodging their responsibility to govern. The same holds true for Martin Schulz’s SPD and their refusal to join in government — although more and more SPD politicians are nudging toward talking to the CDU/CSU. The question remains, will they be able to sway Schulz, who visited President Steinmeier for consultations on Thursday?
Last but not least, another election would be uncomfortable for Merkel, whose halo of infallibility is slipping fast.

The world has come to expect and rely on political stability in Germany, but Angela Merkel’s halo of infallibility is slipping.

Cornelia Meyer

What happens in Germany matters to Europe and to the world. These are uncertain times, with trouble spots ranging from North Korea, over the Middle East and from Ukraine to Venezuela. Merkel is seen as a safe pair of hands, able to stand up to strongmen such as Trump, Erdogan and Putin. Her language is clear, but not provocative. Turkey matters particularly, because the EU managed to achieve a deal with Ankara to curtail the endless stream of refugees over the Balkan route, in return for transfer payments.
Europe, too, needs Merkel. French President Emanuel Macron wants to redraw the EU’s organisational structure, against the backdrop of centrifugal forces from Portugal and Spain to Poland, and from Greece to Denmark. In this context Merkel is seen as experienced and a safe pair of hands. Lastly and importantly, there is Brexit. Germany is the EU’s pre-eminent economic power. The shenanigans of Berlin’s politicians will not change that. Therefore any Brexit deal will need Germany’s input. The Chancellor’s moderating influence could clearly be felt during the EU council last September and thereafter. 
The world at large has come to take for granted political stability in its fourth-largest economy, and to rely on strong German leaders from Konrad Adenauer and Helmut Schmidt to Helmut Kohl and Angela Merkel. That has changed — for the time being at least.
• Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources