Conservative-Green government would mean painful compromises – analysts

A coalition between Germany’s conservative CDU/CSU alliance and the Green Party following snap elections in case of a breakdown of the current government would require significant compromises from both sides and climate and energy policy could prove a “minefield,” analysts at Deutsche Bank Research write in a note to clients. Against recent perception among observers, said parties’ political positions are “radically different in many areas, such as tax and social policy, European policy, climate and energy policy, defence policy and migration policy,” analysts Dieter Bräuninger and Eric Heymann write. “Our observations go to show just how strongly a black-green [CDU/CSU-Green Party] government would need to direct its focus and its available financial resources to climate protection and the energy transition if these issues are to get top priority,” they note, adding that corporates and consumers would have to contend with considerable costs. “This applies particularly if energy and climate protection policy relies heavily on state intervention instead of market-based instruments,” they write. Overall, a conservative-Green government may find it difficult to agree on reliable funding for extra expenses for an accelerated energy transition, coupled with spending to mitigate the impact and extra cost for a significant revamp of the social security system, they say in the analysis, which goes on to contrast the parties’ different approaches in the various policy fields.

Chancellor Angela Merkel’s fourth government – a coalition of her conservative CDU/CSU alliance and the Social Democrats (SPD) – has grown increasingly less stable since its rocky formation, which took half a year after the elections in 2017, where both parties suffered severe losses. In particular, the SPD had to cope with a string of defeats in regional elections, and a slump in the European elections plunged the party into leadership chaos. The SPD has made the currently debated Climate Action Law one of the litmus tests for whether to continue the coalition beyond 2019. But many observers – like the analysts at Deutsche Bank Research – think another weak result in the upcoming elections in the eastern federal states of Saxony and Brandenburg could lead the SPD to end the coalition.

Meanwhile, the Green Party is riding high in the polls, which show them neck-and-neck with Merkel’s CDU. While a CDU/CSU-Green coalition would be a novelty on a federal level, the two parties govern together in respective second terms the federal states of Hesse (under CDU leadership) and Baden-Württemberg (with Germany’s only Green state prime minister).