BERLIN (BLOOMBERG) - German Chancellor Angela Merkel's party is betting on a revived alliance with the Social Democrats (SPD) to dodge the risk of new elections, according to people familiar with discussions in Berlin.
While Dr Merkel has publicly stated she's open to another vote, her backers expect increasing public and political pressure on the SPD to abandon its aversion to a rerun of the "grand coalition" with the chancellor, said the people, who asked not to be identified because the discussions are private. That alliance of Germany's two biggest parties underpinned two of Dr Merkel's three terms, including the last four years.
"A grand coalition would mean continuity and stability in Germany and would therefore be desirable," said Dr Holger Schmieding, chief economist at Berenberg Bank. "But the Social Democrats would demand a high price for such an alliance, and that wouldn't necessarily be good for the German economy."
After coalition talks with the Free Democrats and the Greens collapsed on Sunday (Nov 19), another grand coalition would require overcoming resistance by SPD leaders as well as rank and file after the party emerged battered from previous pacts.
The goal is to appeal to the need for German stability at a critical time for the country and the European Union amid nationalist pressures and challenges posed by Brexit.
The main argument for an SPD about-face is that a grand coalition would be the lesser of two evils. Refusing a role in government and holding out for new elections could lead to even weaker results after the Social Democrats slumped to their worst showing since World War II in the September ballot.
On Monday, SPD leader Martin Schulz said: "I will never join a government with Angela Merkel."
In response, Dr Merkel told ZDF television: "I do hope that they will reflect very intensely about whether they should step up and take responsibility."
For both the SPD and Dr Merkel's Christian Democrat-led bloc, there may be more risk than reward in returning to the polls. Their combined support declined to 51 per cent from the poor September results of 53.4 per cent, according to an INSA/YouGov poll conducted on Monday.
The push for a grand coalition appears to have an important ally in President Frank-Walter Steinmeier, a former Social Democratic challenger for the chancellery who became Germany's non-partisan head of state in March. The former foreign minister has been thrust into a key role in forming a government and on Monday urged all political parties to reconsider their positions.
The call to civic duty includes his former SPD colleagues, most notably Mr Schulz, Dr Merkel's chief rival for chancellorship in the September vote. Mr Schulz's backing in the SPD is tenuous after running a flat campaign against Dr Merkel.
Mr Steinmeier started talks with Dr Merkel on Monday and met with the Greens and the FDP on Tuesday. The Free Democrats won't make any effort to revive negotiations with Dr Merkel, an official briefed on the talks said after FDP head Christian Lindner met the president.
Mr Lindner has said it's up to the SPD to talk to Dr Merkel about getting back together.
On Wednesday, the President will see Mr Horst Seehofer, leader of Dr Merkel's Bavarian sister party, before consulting with Mr Schulz on Thursday, according to a presidential spokeswoman.
Mr Schulz has staked his leadership on taking the SPD into opposition. While he has the support of the left wing of the party, including parliamentary caucus leader Andrea Nahles, he is under pressure from some in the conservative faction to reconsider.
While 78 per cent of CDU-CSU supporters want Dr Merkel to run in case the president calls an election, only 43 of SPD backers want to see Mr Schulz as her challenger again, according to INSA polling for Bild newspaper.
"No one really wants a new election, but it is nevertheless an option that we won't shy away from," Ms Nahles said on Monday.