The maneuvering by Chancellor Angela Merkel and other senior politicians in Germany to form a viable new government is important for Europe, and beyond. Unfortunately, the alarming partisan budget standoff in Washington, D.C., preoccupied most related media attention.
President Barack Obama’s obstinate refusal to negotiate with Republican Speaker John Boehner of the House of Representatives brought the United States to the very brink of financial default. That was averted, but disturbing images of extreme partisan rigidity linger.
In Germany’s national elections held on Sept. 22, the ruling conservative Christian Democratic Union and partner Christian Social Union won the most seats in the lower house of parliament, but fell five short of a clear majority. Their coalition partner Free Democrats, advocates of liberal free markets, lost all seats in the election.
While several weeks have passed with no new coalition, there is no sense of imminent crisis but rather an orderly search for compromise. On Oct. 17, Merkel’s parties and the left Social Democrats publicly announced agreement to begin formal negotiations to create a coalition government.
The Social Democrats, the other major political party, advocate a nationwide minimum wage as one price of a new "grand coalition" government. Higher taxes on the wealthy is another contentious issue.
Andrea Nahles, general secretary of the Social Democrats, is adamant in defending policy positions but also willing to talk. German politicians well understand that stressful and unpleasant negotiations are unavoidable if democratic politics is to function effectively.
The talks will begin Oct. 23, the day before Merkel departs for a European Union summit. A series of European summits since the severe financial crash and lingering recession of recent years have featured demands from German representatives that Greece and other members hold to agreed austerity measures. Germany’s status as by far the largest and strongest manufacturing economy on the continent provides powerful leverage.
Germany has largely succeeded in securing greater financial discipline within the EU, especially on heavily indebted nations of southern Europe. Chancellor Merkel is adept at limiting domestic nationalist political pressures to abandon the leadership role, which includes underwriting the solvency of nations many Germans view as profligate. The success of this balancing act reflects her skill in persuading her constituents that Germany cannot reasonably avoid cooperative engagement with Europe.
In Greece, fierce public resistance to austerity led to growing support for the far-right Golden Dawn party, widely viewed as neo-Nazi. In 2012 elections, the party received enough votes to enter parliament, but has since become mired in controversy over alleged criminal behavior. Despite these tensions and others, the EU has remained intact and euro zone financial meltdown averted.
Financial services remains a realm where the United States, and also the United Kingdom, are more important than Germany in global terms. Predictions years ago that Frankfurt would supplant London, and perhaps eventually New York, have not been realized or even approximated.
However, given the present interconnectedness of the global financial system, the financial failure of Greece and other debt-burdened EU member nations could result in another recession, perhaps even a world crisis. This reinforces the role of Germany, especially but not exclusively in Europe.
Germany’s politicians likely will establish a national governing coalition soon. Merkel’s disciplined, low-key and sensible style is especially popular with today’s Germans.
Washington politicians should learn from this example.