Germany coalition talks: What are the biggest sticking points?

BERLIN — The three parties hoping to form Germany’s next government have agreed on a basic framework for their formal coalition talks in a process that’s been, at least in public, remarkably smooth and collegial.

Now, as they get down to detailed negotiations ahead of a self-imposed Christmas deadline, that early success is being put to the test.

Nearly 300 negotiators from the Social Democrats (SPD), the Greens and the pro-business Free Democrats (FDP) started meeting last week to hammer out the details of a potential coalition agreement. Officials from each of the parties split up into 22 topic-based working groups, covering everything from mobility to democracy to climate issues.

Those working groups are expected to present their recommendations by November 10, at which point the top party leaders will take over and seek to resolve any outstanding issues, aiming to present their coalition agreement by the end of November.

The intention is to then form the new government and vote in the SPD’s Olaf Scholz as chancellor on December 6.

It remains a daunting task: A so-called traffic light coalition of SPD, FDP and Greens — so named for the parties’ respective colors of red, yellow and green — is unprecedented at the federal level, and brings together parties with policies that on some issues are difficult to reconcile.

When they announced they were ready to move on to formal talks last month, the three parties released a 12-page paper outlining the broad framework of a new government — one that showed they had already talked through and reached a preliminary compromise on some of the trickiest issues. 

That framework included something for each of the parties, as well as significant concessions by all of them: Agreeing to raise the minimum wage to €12 per hour, for example, is a priority for the SPD and the Greens; not implementing a speed limit on Germany’s Autobahn is something the FDP campaigned on, but the Greens strongly oppose.

But it also had enough vague language on some of the trickiest issues to leave some wiggle room for negotiations. Here are some of the key areas where the three parties could still clash, and where things stand so far:

Climate

Any coalition agreement will include significant action on climate policy: Investing in clean-energy infrastructure, moving away from fossil fuel vehicles and ending coal production, among other policies, are all aimed at ensuring Germany is on track for the 1.5-degrees Celsius climate-increase goal.

In their preliminary paper last month, the parties said they see sticking to that goal as “our central shared task.” But how far will they go — and how much of the Greens’ ambitious plan on their signature issue will they get to implement?

The three parties wrote that they wanted to end coal in Germany “ideally” by 2030, eight years earlier than planned. But the “ideally” bit leaves room to shift that date if necessary, and it remains to be seen what language they use in any formal coalition agreement.

One other climate policy that’s controversial among the three parties is the Greens’ plan to reduce or get rid of subsidies that contribute to climate change, such as the tax allowance for commuters. The Greens campaigned on this, but the FDP is critical. 

For the Greens, the question is more about whether the eventual coalition agreement goes far enough. They’re under pressure from the Fridays for Future movement to push for stronger reforms, and the Greens’ youth organization said last week it would base its vote for or against the coalition agreement on whether it takes bold enough action on climate issues.

“It needs to noticeably improve things for people in this country. The 1.5-degree Celsius path has to be followed,” Timon Dzienus, the Green Youth’s spokesman, told Der Spiegel last week. “Otherwise we won’t vote for this coalition agreement.”

Fiscal and monetary policy

Taxation and public debt were always going to be some of the most contentious issues in talks between the two left-leaning parties and the FDP — and not just because of a fierce behind-the-scenes battle over the finance ministry.

Last month, the parties wrote that they would stick with the so-called debt brake, which limits public debt to an annual budget deficit below 0.35 percent of GDP. It was a significant victory for the FDP, whose trademark policy has been fiscal restraint and low taxation.

The initial coalition paper also said that a coalition would not “introduce any new taxes on assets and won’t raise taxes such as income tax, corporate income tax or value-added tax.”

But the taxation issue continues to cause some tension between the FDP and its two would-be coalition partners. For the Greens and the SPD, the commitment to not raising taxes is already a significant concession; for the FDP, it doesn’t go far enough.

“There is not much movement in the area of fiscal policy, which includes taxes, I have to be honest,” the Greens’ Robert Habeck said last week, striking the same chord as Scholz of the SPD. 

Both said the FDP’s insistence there should be no tax increases, including for wealthy individuals, means there would be no room for tax relief for lower-income classes. But that brought a sharp response from Volker Wissing, general secretary for the FDP. 

“It doesn’t get us anywhere if each negotiator talks about what they would do if they could govern on their own,” he told German media, adding: “Even though tax relief is not listed in the exploratory paper, that does not mean we are no longer talking about it.”

And FDP leader Christian Lindner also expressed frustration at the other two parties’ handling of the issue, and said he wants the prospect of tax cuts to remain on the table.

“I understand from public statements from the leaders of the SPD and the Greens that both of them apparently are no longer pursuing relief for low- and normal earners,” he told Bild am Sonntag. “We want to continue the internal discussions on this.”

Beyond Germany’s borders, fiscal rules and the European Central Bank’s monetary policy are also on the agenda. The FDP promotes German frugality across the European Union, while the SPD and Greens are open to the concept of common debt.

The preliminary paper’s wording is particularly vague where fiscal rules are concerned: “The stability and growth pact has proven its flexibility,” it reads, leaving room for interpretation as to how that flexibility should be used.

As for the ECB’s monetary regime, the departure of Jens Weidmann as Bundesbank president has reignited a national debate about interest rates that is likely to spill into the coalition talks. 

Foreign and security policy

Foreign and security policy was largely absent during the campaign earlier this fall, but will loom large as the coalition partners look to build on their vague preliminary wording on “Germany’s responsibility for Europe and the world.”

The parties say they’re committed to greater cooperation between European armies, a restrictive arms export policy under a corresponding EU regulation, legal migration routes, and the establishment of a parliamentary committee of inquiry on Germany’s evacuation mission in Afghanistan.

Absent from the paper, however, were a handful of trickier topics, including the new government’s policy toward China and Russia, and the 2-percent spending target for NATO.

“NATO [is an] indispensable part of our security,” the parties wrote, but made no mention of the spending goal or the nuclear sharing principle. (The Greens are critical of the 2-percent goal, while the FDP supports the policy and the SPD is divided. When it comes to nuclear sharing, factions inside the SPD, as well as the Greens, oppose the practice.)

More broadly, it has emerged in recent days that the SPD and Greens are looking to cut defense spending, according to media reports.

The outgoing Christian Democratic Union defense minister had planned to add 20,000 extra soldiers to the Bundeswehr in the coming years, but the SPD and Greens apparently want to take another look at that, while the FDP has said it would not oppose the change of direction if the Bundeswehr were up to its tasks with fewer personnel.

Regarding Russia, the SPD suggests the need for a new “Ostpolitik” in its election program, while the Greens and FDP favor sanctions and civil society support. 

The Greens’ Annalena Baerbock has also declared Nord Stream 2 to be unlawful under European law, while the SPD — which governs Mecklenburg-Western Pomerania, the state where the pipeline ends — is a robust defender of the German-Russian project.

Other tricky issues

Pension reforms: The parties said last month that they don’t plan to cut pensions or raise the age at which people can start receiving benefits. But the bigger question — how should a new government pay for this? — remains unanswered, and negotiators may have very different views on how to make that happen.

Housing policy: With rising rents in Berlin and across the country, affordable housing has been a key focus, particularly for the SPD. Both they and the Greens want to see a stronger national Mietpreisbremse, or rent brake, that would help rein in skyrocketing rents, something the FDP has opposed in the past. In their coalition framework, the three parties called for the construction of 400,000 new apartments per year, 100,000 of which would be subsidized by the government.

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