All eyes on Merkel's opponents as they debate price for a coalition deal

German Chancellor Angela Merkel prepares to lead the weekly cabinet meeting in Berlin on Nov 22, 2017. PHOTO: AFP

BERLIN (BLOOMBERG) - German voters handed Angela Merkel a victory in September's election, but they might be about to get her opponents' policies.

Senior figures within the second-placed Social Democrats (SPD) are pushing their leader Martin Schulz to consider another coalition with Merkel, arguing that they could name their price to the weakened chancellor and avoid the likelihood of further punishment in a fresh vote. Others remain dead-set against repeating their alliance with the chancellor.

A hint of which way the party is leaning may come as early as Thursday after Schulz consults with German President Frank-Walter Steinmeier, who has urged all political groups to put responsibility to the nation ahead of party interests. Schulz stoked speculation by saying he's sure a solution can be found to end the impasse.

As Merkel scrounges for options to begin her fourth term, the SPD split offers clues to a way past the political limbo in Europe's biggest economy.

While Schulz immediately ruled out joining her in government, he's facing increasing pressure to reconsider after an inconclusive national election that's left Merkel a caretaker chancellor.

"It's about policies that we want to implement," Johannes Kahrs, an SPD lawmaker from the party's business-friendly wing, said in an interview. The Social Democrats should engage with Merkel's Christian Democratic-led bloc and "at the end we'd see which parts of our election platform we can push through," he said.

After Merkel's coalition talks with the Free Democrats and Greens broke down on Sunday, the focus has turned to the SPD and the president's effort to help secure stability.

Though officially non-partisan now, Steinmeier is a veteran of the "grand coalition" of the two biggest parties that has governed Germany for eight of Merkel's 12 years in office.

A Social Democrat, he was her first-term foreign minister, unsuccessfully challenged her for the chancellorship in 2009, then returned as foreign minister in her latest term after a four-year stint as opposition leader in parliament. This year, Merkel backed him for the post of head of state.

Seizing the moment rather than staying on the sidelines would give the SPD its biggest leverage yet over Merkel. The party could use this opportunity to expand social programmes such as health care and push the chancellor to team up with France to integrate Germany more closely with the rest of the euro area.

"The SPD is wrestling with itself, and it would be better not to interfere with clever advice from the sidelines," Peter Altmaier, Merkel's chief of staff, told broadcaster N24 on Wednesday. "People want an effective government in place, and that is the task we are setting ourselves. We would like everyone to see it the same way."

'Good Solution'

Schulz appeared to have boxed himself in, saying on Twitter as recently as Monday that his party "is not available" for a grand coalition, before changing tone on Wednesday.

"The SPD is completely aware of its responsibilities in the current difficult situation," he told the Deutsche Presse-Agentur newswire, saying a "good solution" can be found in the days and weeks ahead.

The president plans to expand his talks next week to bring in parliamentary caucus leaders, including SPD left-wing leader Andrea Nahles. Schulz, a centrist, is also feeling the heat because he wants his party to re-elect him as chairman in December.

But that's still a hard sell for many rank-and-file members who view the SPD's two coalitions with Merkel as the reason for its electoral decline to a postwar low.

Support for the SPD in a Der Spiegel poll was 19.5 per cent, 1 percentage point below its showing in the Sept 24 election. Merkel's CDU-CSU bloc, which took 33 per cent in the vote, declined to 29.2 per cent, in a poll published Tuesday.

Some on the SPD's left vehemently oppose another "grand coalition" with Merkel and would prefer to see a minority government in place. They want a return to opposition to sharpen their profile and turn their policies further away from the Merkel-dominated center, though the chancellor has said she'd rather face another election than govern without a majority.

Merkel, the Free Democrats and the Green party "were elected and now they need to get their act together" and find a way of governing jointly, said SPD lawmaker Axel Schaefer.

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