Germany is entering uncharted territory in the wake of last month’s general election: never have the CDU/CSU „Union“ parties, the FDP and the Green Party formed a coalition at a national level. The differing alignments of these parties entail the prospect of intensive, long-drawn-out negotiations, which may drag on until Christmas or for even longer. The main sticking-points concern migration and environmental policy: it is not only that programmatic positions differ greatly between the parties on these scores; these policy areas also happen to be part of the brand core of the „Union“ and the Green Party, respectively, meaning that both are likely to show only limited willingness to compromise. However, the parties involved should be more eager to forge agreement in other fields such as tax or social policy.
A particular focus lies on the Europe policy of the parties involved in the talks. The particular explosiveness of Europe-policy topics stems from the fact that their implications affect the entire Community as well as its individual member states and will possibly therefore be of the greatest relevance for the government-bond market. Where the „Union“ hardly touched on the topic in its election manifesto, the FDP is advocating that the new government should adopt a much more „ordo liberal“ approach, while the Green Party is calling for a more social Europe. However, since certain domestic-policy topics carry even more weight and since all parties wish to promote political integration across Europe in any case, that could be the basis for a possible consensus. Controversial demands, for example for dismantling European rescue funds in the long term (FDP) or else introducing euro bonds (Green Party), would probably be left out of a coalition agreement.
The four-party government would presumably face a serious test if the sovereign-debt crisis were to flare up once again. In particular, the FDP and parts of the „Union“ would only be willing to agree to the launch of fresh bailout programmes under the auspices of the ESM if strict conditions were complied with. This could put some countries in the southern eurozone in a difficult situation. On the other hand, a „Jamaica“ coalition would not, by any means, oppose aspirations to greater political integration in other European states. The debate with France will probably therefore revolve principally around the question of whether greater European integration should go hand-in-hand with greater financial solidarity.
The tables show the positions of the parties on different topics and give an assessment of the possible conflict potential.