Political Overview: G20 meeting taking place in Hamburg, CDU presents election program, Merkel heading into summer recess with huge poll lead

Angela Merkel will host the annual G20 meeting in Hamburg this weekend, welcoming state leaders from the world’s most important economies in Germany to discuss a whole plethora of urgent world affairs. Topics on the agenda include for instance the most recent diplomatic incidents concerning Qatar, the ongoing civil war in Syria, potential threats posed by digitisation and large-scaled hacker attacks and future prospects for the African continent. More than 19,000 policemen have been deployed to protect the chancellor’s high-profile guests since at least two major protest marches have been announced, one of them including well-known militants that are particularly  likely to use violence. For world leaders, the summit itself is widely considered an expedient platform to familiarise themselves with each other and to address major challenges as a seemingly unified bloc. However, Ms Merkel may also take the opportunity to distinguish her calm leadership approach from the more impulsive style of U.S. President Trump and his Turkish colleague Erdogan, thus strengthening her own role as a global key player.

Domestically, the chancellor is maintaining a strong position as well. Together with CSU chairman and Bavarian Minister-President Horst Seehofer, Ms Merkel has just presented their parties’ election manifesto, labelling it „a great opportunity to dream a little bit about the future.“ With not even 80 pages, the CDU/CSU’s program is not particularly extensive but still aiming at a great number of different subjects: More housing construction projects, lower unemployment figures and taxes, increased investments in the fields of research and education and a more restrictive asylum policy are all mentioned in the text. However, the refugee crisis has lost its topical dominance with even Mr Seehofer stating that his infamous „Obergrenze“ (upper limit) won’t play any further role for the election campaign. „It’s alright. There is not a single point where we had a serious content-related dispute“, he proclaimed. Since Ms Merkel is still leading in the most recent GMS (06.07., 39% to 23%), Forsa (05.07., 39% to 23%) and Forschungsgruppe Wahlen (07.07., 40% to 24%) polls by double digits, the CDU/CSU’s manifesto will most probably serve as the foundation of a potential coalition treaty with either the FDP or the Greens – maybe even with both.

Political Overview: Bundestag approves same-sex marriage, Schulz attacks Merkel, CDU Wirtschaftstag showcases U.S.-German dissonances on trade

In a historic vote, a strong majority of Bundestag MPS has approved same-sex marriage (393 MPs voted in favour, 226 against) on Friday, making Germany the twelfth European nation and the twenty-third worldwide to fully allow and recognise the „marriage for all“. Previously, Greens, FDP and SPD have voiced sharpe criticism on the CDU/CSUs stance on the subject, declaring same-sex marriage a non-negotiable precondition for entering a Merkel-led coalition after the upcoming federal elections in September. Things started to gain steam when Ms Merkel subsequently called the question one „of conscience“, thus enabling SPD lead candidate Martin Schulz to call for a  successful last minute vote. Political commentators remain divided over the question if the hasty vote on the issue was based on Ms Merkel’s intention to take a crucial topic with approval ratings of more than 80 percent off of the agenda or if the chancellor was tactically outsmarted by her parliamentarian opponents. In any case, the fact that much more CDU/CSU MPs than expected supported the bill – despite the confusion surrounding its introduction – may serve as a strong indicator of growing intra-party comfort with the issue.

Just shortly before, Mr Schulz has dominated the headlines with his sharp attack on Ms Merkel who he accused of „assaulting democracy“ by dangerously depoliticising Germany’s political discourse. After harsh criticism, Mr Schulz has defended his claims and reiterated his plan to replace the Merkel administration as a hole instead of just entering another grand coalition. However, Mr Schulz is still running low in the polls with the most recent Forsa projection giving his SPD a mere 23.0% – a result that would match the party’s historical 2009 defeat. 

Meanwhile, the Wirtschaftstag, a yearly convention held and organised by the CDU’s Economic Council, has shown new cracks in the already strained relationship between the U.S. and Germany. Ms Merkel and U.S. Commerce Secretary Wilbur Ross presented quite divergent visions of how future trade exchange could look like with Mr Ross heavily lamenting Germany’s and Europe’s trade surplus, a topic more and more shaping up as a recurring pattern of criticism the Trump administration seeks to put emphasis on. On the other hand, Ms Merkel demanded a reform of European competition law to deal with the challenges mostly U.S.-based digital platform are providing for the local European markets. According to Merkel, digitisation will bring together different industry sectors in an unprecedented way but the current legal provision are not yet suited to handle the possible implications of such a developments. 

Political Overview: British negotiation capability questioned, SPD earns mixed reactions for tax plans, FDP rising to new heights

Almost exactly twelve months after the infamous referendum of June 2016, EU lead negotiator Michel Barnier and his UK counterpart David Davis have formally begun Brexit negotiation talks in Brussel, thereby opening up the latest chapter of the British withdrawal from the European institutions. Meanwhile, German politicians have voiced strong criticism against the UK’s negotiation stance which appears to be all too vague, erratic and additionally weakened by the recent parliamentarian elections’ political turmoil and the subsequent government reshuffle. „A negotiation partner not knowing his own goals is a difficult partner“, German MEP Elmar Brok noticed – a position that was quickly seconded by Foreign Minister Sigmar Gabriel and SPD lead candidate Martin Schulz. Both SPD politicians called for „British realism“ and clear yet reasonable negotiation demands.

Previously, Mr Schulz has unveiled his tax plans which would not only see top income but also corporate tax rates rising. Consequently, reactions varied between staunch opposition and cautious praise: the President of the Federation of German Industries (BDI), Dieter Kempf, didn’t withhold criticism and accused the SPD of knowingly hampering the economy. Contrasting this position, economists from the SPD-leaning German Institute for Economic Research (DIW) praised the plans as a reasonable and feasible balancing act between appeasing the party base and reassuring the corporate world that a Schulz chancellorship might only seek comparatively moderate changes. Yet, there is no hint that embracing the issue might save Mr Schulz from his quickly deteriorating poll numbers and generally poor chances to replace Ms Merkel.

This is even more the case since another party is already rising in the polls and creating the kind of momentum the SPD has lost since the May 2017 state elections: the FDP. Germany’s liberals have been revitalised by an energetic campaign and the increasing popularity of party chairman Christian Lindner who is widely considered to be young, smart and well-spoken enough to successfully reshape the party’s unfavourable image. With recent FDP numbers steadily oscillating between 8.0% (Forsa) and 10.5% (Allensbach), the chances of a CDU/CSU-FDP coalition have also been elevated to the rank of a serious theoretical possibility. For Ms Merkel, it would be another power option to use as a bargaining chip in possible coalition negotiations. For Mr Schulz, It’s another burden to overcome.

Political Overview: Merkel addresses digital summit, Gabriel warns of Qatar repercussions, Jamaica coalition in Schleswig-Holstein agreed

Considerable progress has taken place in transforming Germany into a digital society but further digitisation efforts could be jeopardised by rising sentiments of complacency among corporations. This is the core of politicians’ and experts’ joint assessment at the recently held 2017 Digital summit in Ludwigshafen, Germany’s most important platform to exchange high-level views on the subject and its various implications.

This year’s conference had a remarkably broad focus with issues reaching from regulative strategies to the transformative power of workplace digitisation. In her keynote address, Chancellor Merkel put special emphasis on underscoring the important role small and medium-sized enterprises are supposed to play in the future, at least if they don’t want to get marginalised by powerful platform providers already making use of Big Data. Also highlighted were the necessity of a better legal framework to ensure competition and support innovation and the call for better cooperation structures between relevant actors on the national as well as on the European level.

German Foreign Minister Sigmar Gabriel has warned of perils and insecurities emerging from the severe crisis between Qatar and the fourteen countries that have fully or partially cut diplomatic ties with the emirate. „There’s serious danger of this dispute turning into a full-fledged war“, Gabriel said, a war which would greatly hamper future efforts to stabilise the region and to balance out the effects of its smouldering Sunni-Shia divide. Gabriel also spoke out in favour of a more restrictive arms export policy that would increase transparency and parliamentarian involvement.

Meanwhile, the long-awaited Jamaica coalition between CDU, FDP and Greens has been formed in Schleswig-Holstein, elevating Germany’s northernmost state to a pioneer position since only the Saarland has ever experimented with this combination. CDU lead candidate Daniel Günther is expected to head the coalition as Minister-President while Green key figure Robert Habeck will remain in charge of an enlarged environment department. The coalition is widely seen as a rehearsal to test a more and more popular power option for the upcoming federal elections in September.

An electoral car crash

In one of the great dramas in British political life, the Prime Minister, Theresa May called an election when she was 25 points ahead in the polls – and six weeks later is now clinging to power, without a majority in Parliament, dependent on a small party from Northern Ireland.

She called the election at a time when she appeared to be in a very strong position and the opposition weak and unelectable. She asked for a strong mandate to negotiate a good deal with the EU as the UK leaves, but has been left barely able to command a majority in Parliament.

So what happened?

The figures tell some of the story. The number of votes for both major Parties went up, but the increase for the opposition Labour Party was 9.5%, nearly double the 5.5% increase for the Conservatives. Many of these were from people who previously voted UKIP, but now, after the referendum, felt able to return to Labour. The Conservatives had bet that the vast majority of these Brexit-supporting voters would come over to them. In fact it may be that Jeremy Corbyn’s lukewarm support for Remain and decision to accept the referendum result gave these voters the opportunity to return to Labour.

The result can also be ascribed in part to a rejection of 10 long, hard years of Conservative Party austerity. Many of those who voted for the UK to Leave the EU have suffered during the attempts by the Conservative Government to cut spending. The demographic that voted to Leave last summer, angered by paying a price for globalisation and feeling ignored, are it seems, also angered with cuts to school budgets, pressure on the National Health Service and cuts to local authority services.

The Conservative Manifesto also attacked things that are important to the core Conservative vote, breaking promises on pensions and proposing that peoples’ homes would have be sold to pay for their long-term health care.

The final failure was that the Conservatives tried to run a presidential campaign which claimed that the Prime Minister was ‘strong and stable’. The country liked that idea initially and her support soared, but within days Mrs May was changing her mind about key parts of the manifesto, proving that she was neither strong nor stable.

On the other side, the Labour Party ran a campaign that promised everything to everyone. Promises of increases in spending on everything, paid for by only a few tax rises on the very wealthy. This proved irresistible to a huge majority of younger voters. It is also true that some voters thought that they could vote for the Labour Party safe in the knowledge that the Conservatives would win, a sort of protest vote. They were very nearly proven wrong.

Labour did not win, but the Conservatives only managed to win 319 out of the 650 seats in the lower House of Parliament. To have an effective working majority (once the Northern Ireland party Sinn Fein, which does not take it seats in the British Parliament, and the Speaker and Deputy Speakers are excluded) parties need to command 320 seats. After this election no party has a working majority. The Conservatives are therefore trying to secure an agreement with the DUP, a small socially conservative Party from Norther Ireland, which would get the Conservatives to 329 seats and so a functional majority.

This will still only be a tiny minority, handing a lot of power to factions within the Conservative Party. Some say this would make the Prime Minister too dependent on Hard Brexiteers, who want a minimal deal with the EU. This is true, but it is equally true she would also be vulnerable to Soft Brexiteers, who would like to leave the EU, but only in name, not in practical terms.

Mrs May will remain as Prime Minister for the moment, but her political credibility has been shattered. There is a lot of anger in the Party; and the arrangement with the DUP is fragile. ‘Confidence and supply’ is the nature of the agreement between the Conservatives and the DUP. It is a looser arrangement than a formal coalition deal and means that the DUP will support the Government and its budget, but all other votes would be determined on a case-by-case basis – leading to considerable day- to-day uncertainty in government business and its legislative agenda.

In her weakened state, the Prime Minister has reappointed most of the key players in the previous administration to their previous Cabinet positions. Despite this, there remains a lot of unhappiness among senior Cabinet members and the wider Conservative Party over the way she conducted the election campaign – and yet there is also no clear agreement among the Party on a credible alternative leader, nor a strong appetite for an imminent leadership contest.

It has been announced that Queen’s Speech – in which a new Government sets out its business for the year – has been delayed. This underlines the difficulties the Government is having in putting together a programme of legislation that would pass through both Houses of Parliament. It is understood that civil servants are looking at the legislative programme only on the basis of Bills that will receive cross-party support in both Houses.

In terms of major policy implications, there have been further indications that the Government will soften its opening negotiating position in the Brexit negotiations. Currently the debate is between those favouring a ‘no deal’ WTO option, to those favouring membership of the EU Customs Union and/or some form of membership of the Single Market, or trading arrangements in line with the EEA or the EFTA rules.

Given the numerical instability of the Government, the level of political uncertainty is expected to continue. There is good chance of a further election later this year or early next year – although there is recognition among many Conservative Party supporters that this would be very risky for them.

Even if Theresa May remains in place, we wold expect further speculation concerning a future leadership candidates.