GERMANY'S GRAND COALITION: THE RETURN OF POLITICS

C O N F I D E N T I A L BERLIN 001614

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/08/2021
TAGS: PGOV GM
SUBJECT: GERMANY'S GRAND COALITION: THE RETURN OF POLITICS

REF: BERLIN 846 AND PREVIOUS

Classified By: Acting PolCouns John Lister. Reason: 1.4(b) and (d)


1. (U) Summary. After a winter and early spring in which the
internal troubles of the SPD provided almost the only
domestic headlines, politics returned to Germany in May as
the government turned its attention to a series of domestic
issues: passage of an anti-discrimination law and tax hikes
(both on the rich and for all through the VAT),reform of the
health care system, and amendments to the Hartz IV
unemployment insurance scheme. Dealing with these
contentious issues, after a "honeymoon" spent demonstrating
the viability of the Grand Coalition, has prompted new
debate within the coalition and cost the government and the
Chancellor a significant measure of support according to
polls. Striking, too, is the beginning of sniping at the
government from CDU Ministers-President in several western
states. While acknowledging that partisan feeling has risen,
contacts in the parties, government, and Bundestag have told
us that they see nothing dramatic in these developments, that
work of both the cabinet and parliament continues to be
professional and largely non-partisan, and that until at last
2008 they see no real threats to the Grand Coalition's
stability and survivability. The principle "condemned to
success" continues to guide top-level thinking, we are
assured. End Summary.

The Domestic Agenda: A Recipe for Strife
--------------


2. (U) For its first four months, the Grand Coalition and
Chancellor Merkel carefully avoided contentious domestic
issues, focusing on foreign affairs and preparing for state
elections in east and west. With these behind it, the
government in May passed a VAT hike, called the largest tax
hike in German history -- a step that was bound to cause it
trouble. In addition, the Bundestag passed an
anti-discrimination law that has particularly hurt the
CDU/CSU side of the coalition. During the election the
CDU/CSU had promised not to pass a law that would exceed
European Union requirements, but it ended up agreeing to a
law that went so far that it pleases even the Greens,
according to a Green staffer. These two deeds precipitated a
slide in the government's and Chancellor's poll standings.


3. (C) At the end of May, the monthly "Deutschland Trend"
poll by Infratest-Dimap showed a nine percent fall in
satisfaction with the government since early May, from 40
percent to 31 percent. Satisfaction with Chancellor Merkel
fell by the same amount, to 63 percent -- still very high. A
May 28 poll for Welt am Sonntag, which sought to measure
confidence in the government, showed similar drops. Only 33
percent believed the government could resolve Germany's
problems and only 36 percent thought Angela Merkel was a
strong Chancellor (vice 42 percent in the fall). However,
Juergen Hofrichter, Director of Election research for
Infratest-Dimap found little surprising in the numbers. The
tax increase in particular, was the likely source of much of
the unhappiness and he saw, at this point, nothing that could
be identified as a definite trend. He noted in particular
the ambivalent public attitudes toward government as a whole:
In a May Deutschland Trend poll, 58 percent said they
"rather agreed with" both of the following: 1) that the Grand
Coalition isn't solving problems any more than the old
government and, 2) that only a Grand Coalition can carry out
necessary reforms. Further muddying the picture, 52 percent
in May said the coalition had been performing well.


4. (C) Beyond the direct effects on public opinion, the
anti-discrimination package and aspects of the federalism
reform and Hart IV led notably to criticism from CDU
Ministers-President including Roland Koch (Hesse),Christian
Wulff (Lower Saxony),and Juergen Ruettgers (North
Rhine-Westphalia) that the SPD was getting its way too much
in government councils. Michael Guentner, Office Director
for CDU/CSU Bundestag Caucus leader Volker Kauder (a Merkel
ally) has told us that the CDU is suffering from a delayed
realization that the election victory was far from complete
-- the CDU/CSU and SPD are virtually equal partners in
government. Even though the CDU may hold the Chancellor's
office, Angela Merkel and the party have to be willing to
make significant compromises. SPD Vice-Chancellor
Muentefering also leapt to the Chancellor's defense, calling
on CDU state leaders to support their Chancellor. Though
this was at first seen as a sign of SPD-CDU/CSU conflict,
Merkel has since admitted that she was aware in advance of
Muentefering's remarks. It is too early at this stage to
tell how much this strife will affect the public standing of
the Grand Coalition. However, CDU staffer Olav Goehs was
sanguine -- seeing party tactical considerations behind the
CDU Minister-Presidents' maneuverings and a predictable rise
in partisanship between SPD and CDU/CSU now that they have
both established the basic workability of the coalition and
have begun to deal with more contentious issues.

Impact on Government: Allegedly Minimal
--------------


5. (C) Despite the acknowledged strains -- hyped by media
focus -- the government has continued to function well. Both
Guentner and SPD HQ official Engel offered us variants of the
argument that, for both sides, the coalition must succeed if
the parties are to mount a credible campaign for outright
victory in 2009. Relations between Kauder and his SPD
counterpart, Peter Struck, remain excellent, and substantive
discussions between the Union and SPD caucuses are not
ideologically driven, according to Guentner. Both Guentner
and Engel also acknowledge that the government is benefiting
from a rare, extended period (March 2006 to spring 2008)
without major competitive elections, which facilitates
non-partisan cooperation. For example, the Office Director
for Minister of State Hildegard Mueller, responsible for
Health Reform, reports that cabinet negotiations are making
steady progress in a dispassionate, businesslike atmosphere
with both sides showing the will to find a compromise. The
Hartz IV issue is still unresolved and will not be tackled in
depth until after the summer break, but our contacts also
assert that a compromise will be found. While there had been
speculation that some states might seek to block the new
Anti-Discrimination law in the Bundesrat, the CDU's Goehs has
reported that all will vote for it, though some will offer a
rare explanation of their vote. The media are also reporting
that SPD Bundestag Caucus leader Struck now believes the
federalism reform package can be passed by the government
before the summer recess, as originally planned.

Stable Government
--------------


6. (C) 2006 was likely to be the year in which
over-optimistic public expectations of the Grand Coalition
fell. However, read all together, the poll results do not
suggest a permanent or catastrophic loss of support for the
government -- Chancellor Merkel's personal rankings in
particular remain quite good. The widespread view that the
sinking polls, the rise in public partisanship, and the
maneuverings of CDU "state princes" are normal and were to be
expected is also enabling the government and parliamentary
leaders to respond calmly and to carry on with business as
normal. We see little on the horizon that can be considered
likely to pose a serious challenge to government stability
for the balance of 2006 and into 2007. The real tests seem
likely to come, according to the SPD's Engel and others, in
late 2007 when political leaders begin to focus on the
important state elections in spring 2008.
BAUMAN