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  • 2018/12/11
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The choice of continuity and stability rather than renewal

The race for the presidency of Germany’s Christian Democratic Union (CDU) has concluded with a win for Annegret Kramp-Karrenbaeur following eight regional conferences culminating in a vote by all 1,001 party delegates meeting in Hamburg last weekend. The party’s former secretary general garnered 517 votes (51.75% of the total), while her main rival, Friedrich Merz, amassed 482 votes. Current health minister Jens Spahn didn’t make it past the first round of the election.

 

What were the candidates’ main proposals?

This election was mainly dominated by questions over migration and the right of asylum, which took centre stage in debates due to the need to reassure voters that the party is refocusing on its traditional values. There was not much to choose between the candidates on these issues, with all three advocating more restrictive policies to guarantee greater domestic security. In the past, Merz and Spahn had already publicly disagreed with the Chancellor’s generous asylum policy. Meanwhile, Kramp-Karrenbaeur recently differentiates herself by speaking out in favour of transit centres and stronger bilateral agreements to speed up the process of repatriating irregular immigrants and rejected asylum seekers. However, unlike her rivals, she takes a longer-term view, affirming the need for a concerted European solution.

On economic policy, Merz mainly stood out for his wish to refocus the party around the market-based social model, favouring more deregulation and significant tax cuts. Firstly, he wanted to lower taxes by completely scrapping the solidarity surcharge* by 2021, whereas the current coalition agreement provides for its being gradually phased out. He also called for action to simplify the tax system through greater deregulation. Spahn, meanwhile, put the priority on reforming the social welfare system with the aim of lowering its cost. With nothing much new to add to the programme already set out by the grand coalition, Kramp-Karrenbaeur focused on her 18 years’ experience in the Saarland government and her role as Minister-President of Saarland for seven years.

 

The new CDU president’s roadmap

The 31st congress of the federal party identified a number of commitments to which Kramp-Karrenbaeur should hold. The party committed to approve the United Nations pact aimed at better controlling immigration and combating exploitation of migrant workers. On defence, the CDU came out in favour of boosting the personnel and financial resources allocated to the Bundeswehr (the federal German army). As a result, the defence budget is set to reach 1.5% of GDP by 2024. On taxation, the CDU approved abolishing the solidarity surcharge by 2021, as opposed to partially withdrawing it, as set out in the coalition agreement. On the environment, the party voted in favour of scrapping priority rights to build wind turbines and putting the decision back in the hands of municipalities. Meanwhile, the party said the automotive industry should, as far as is technically feasible, improve diesel vehicles incriminated in the greenhouse gas emissions scandal. So as not to overly burden the public purse, grants to help buy cleaner vehicles will only be made available in the most heavily polluted cities.

 

Facing up to a more clouded global environment

While the German’s development model has, up to now, been only modestly impacted by the subprime and sovereign debt crises, recent international upheavals have changed the game. President Donald Trump intends to rebalance the US trade deficit, a big chunk of the European portion of which is attributable to Germany. Tensions over potential tariff hikes on European imports could thus resurface. Furthermore, Germany will lose key support for its liberal economic policy when the United Kingdom leaves the European Union next March. Lastly, China’s growing share of global trade and the challenge of obtaining reciprocal investment rules and securing intellectual property rights are raising questions as to whether Germany can maintain its leadership on trade or whether it will be forced to cede it to China. These major changes could prompt Germany to play a more substantive role in deepening the Economic and Monetary Union.

 

What are the political challenges to be met?

The CDU, the CSU and the SPD have helped guarantee Germany’s political stability during Angela Merkel’s various terms of office under different coalitions. But it seems this partnership is gradually being eroded over time. The presence of seven parties in the Bundestag is lessening the influence of the main two traditional parties, both in crisis. While the CDU/CSU is still Germany’s leading political party, it is currently polling little more than 26% in opinion polls, compared with over 41% back in 2013. The SPD also has a credibility deficit: three past coalitions with Angela Merkel have left it the country’s third-largest political force behind the Greens, who have pushed it out of second place. The CDU’s new president is therefore going to have to resolve the dilemma of how to win back a lost electorate without veering to sharply to the right and offending a key future coalition partner: the Greens. The grand coalition with the SPD is indeed under threat in the short term. The SPD’s mid-term assessment of its contribution to government, in September 2019, could prompt the party’s leaders to abandon their seat at the coalition table and take up an opposition role, giving them greater freedom to put forward new proposals more satisfying to their voters. Apart from the grand coalition, the only way to achieve a parliamentary majority in the Bundestag would be through an alliance with the liberals of the FDP and the Greens. But the Greens, rising in opinion polls, would be reluctant to agree to a more liberal turn, and the FDP on its own would not be enough to secure a governing majority. So Kramp-Karrenbaeur is going to have to consolidate her own party before embarking on the quest for a new coalition: a premature break-up of the “GroKo” would push the country towards another early election that would see the Greens gain more seats in parliament, which would be detrimental to the CDU.

 

 

* Solidarity surcharge: a tax put in place to cover the costs of German reunification. It is charged at 5.5% of income and applies to all taxpayers, whether individuals or companies.

 

 

Philippe Vilas-Boas - philippe.vilasboas@credit-agricole-sa.fr 

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