They hold all the cards German party poised to grind EU to halt after elections

Germany: Next chancellor will be ‘compromise’ says Parry

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The Free Democratic Party in Germany is set to become a thorn in the EU’s side, with a lot of power on whoever will replace Angela Merkel as Chancellor after the September 26 elections. The liberal party is expected to be in government regardless of whether CDU leader Armin Laschet or SDP leader Olaf Scholz wins the top spot in the Bundestag.

According to German economist Dr Lars Feld, there are two possible coalitions in the run to form a new German Government and both will need the support of the Free Democrats.

The party would hold a lot of power when it comes to German fiscal rules and consequently EU economic policies.

A debate is already going on in the EU over a possible reform of the bloc’s fiscal policy of the Growth and Stability Pact.

Italy, Spain and France are in favour of reforming the rules so that temporary provisions introduced for the coronavirus pandemic become permanent, rendering, therefore, member states’ debts permanent too.

But northern European states are already rebelling at the idea, with eight countries already issuing threats to the European Commission of an upcoming uproar.

France and Germany have historically been at the centre of all the disagreements between the north and south EU.

On the issue of fiscal policy reforms, France is backing southern states, whereas Germany would traditionally side with Northern Europe.

The German elections however have seen Angela Merkel’s government take a back step, allowing for the upcoming new administration to weigh into the discussion once a new government will be formed.

Dr Feld explained how the Free Democrats, traditionally opposed to permanent debt, could become a real power at home as well as in the EU, currently “holding all the cards” on the economic future of the bloc.

He told “Fiscal rules are at the centre of this discussion.

“So when the German debt brake prevails, there’s also going to be pressure on fiscal policies in other EU member states.

“The point here is that it very much depends on the Free Democrats if they are in a traffic light coalition (SDP, FDP, Greens).

“How much emphasis would they put on the question of observing the debt break in Germany and also regarding reforms of fiscal rules at EU level?

“At the moment, the Free Democrats are putting a strong emphasis on these two issues, remaining conservative in a sense and not seeking a change of the fiscal rules at EU level.

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“But on the other hand, the Free Democrats also want to have tax cuts.

“Enormous tax cuts cannot be realised in a scenario with the Social Democrats (SDP), so there could also be a kind of coalition agreement that trades dumb tax cuts against more flexibility in fiscal rules.”

Olaf Scholz, leader of the SDP, is currently heading the polls ahead of the vote.

His rival and Merkel’s successor Armin Laschet is failing to appeal to voters worried about climate change, immigration and the COVID-19 pandemic.

Instead, Scholz, the second most powerful figure in the ruling grand coalition, is pitching himself as the candidate best placed to continue the course set by Merkel, who is still very popular with voters.

Angela Merkel said on Thursday nobody in her conservative bloc ever doubted that they faced a tough battle to hold the chancellery after her 16 years in office, declining to speculate on the outcome of Germany’s September 26 national election.

“That after 16 years one does not automatically … return to the chancellery, that was clear to everyone in the CDU and CSU,” she told a news conference, adding she anticipated a closely fought election.

CDU grandees backed Laschet in April as the conservative chancellor candidate ahead of Markus Soeder, the more popular leader of the CDU’s Bavarian sister party, the CSU. The two parties – ‘the Union’ – run jointly in federal elections.

After losing the conservative candidacy, Soeder jibed at the CDU before coming round to supporting Laschet. But now frustration is boiling over in the Bavarian camp at Laschet’s failure to resonate with voters.

“Of course, we would be in a better position with Markus Soeder,” CSU General Secretary Markus Blume told Der Spiegel news magazine. “The continuing high approval ratings for Markus Soeder show what potential we actually have as a Union.”

Laschet later responded calmly to Blume’s comment, saying there were many in the CSU who supported him, including Soeder.

Soeder himself made clear he stood behind Laschet, telling Handelsblatt business daily that a weekend CSU conference, which Laschet will attend, would demonstrate solidarity.

“I hope that we will be able to send two signals: unity within the CSU but also with the CDU and Armin Laschet,” Soeder told the paper.

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