BERLIN • German Chancellor Angela Merkel yesterday took a conciliatory tone towards the Social Democrats, or SPD, as she invited them to begin talks on securing a stable government capable of tackling the challenges facing Europe's biggest economy.
Speaking at the headquarters of her Christian Democratic Union (CDU) party in Berlin, Dr Merkel lobbied for the reluctant SPD to renew an alliance. To underscore the need for a government with a majority in the Bundestag, she rattled off a series of urgent issues including Brexit, European integration proposals from French President Emmanuel Macron, as well as strained relations with Russia and the United States.
"People expect their problems to be solved and we believe that the best way to achieve that is by forming a stable government," she said. "That's why we are ready to begin talks with the SPD. We know that such talks require compromise."
The political stalemate in Europe's biggest economy is showing signs of easing as the SPD abandon its strict rejection of a revival of the alliance that underpinned two of Dr Merkel's three terms. Even before the talks officially started, the SPD and Dr Merkel's conservative bloc have begun laying out their positions.
Dr Merkel earlier made it clear that her coalition partner would have to support a balanced budget and broadly pro-business policies. The list of demands from the SPD includes higher pensions and income tax cuts for low earners.
Dr Merkel and SPD head Martin Schulz, her defeated election challenger, are due to meet on Thursday at the invitation of German President Frank-Walter Steinmeier, who is urging party leaders to find a way to avoid new elections.
The SPD opened the door to a re-run of the grand coalition a week after talks with the Free Democrats and Greens broke down. The impasse had raised concerns over German stability as Europe faces risks posed by Brexit and a rising tide of nationalist populism.
But reaching a deal will not be easy, with next month's SPD convention expected to be key.
The SPD, which had initially rejected a role in government after slumping to its worst election results since World War II in September, is seeking to gain leverage with the condition that any deal be subject to approval by the left-leaning party's members.
For SPD members, the alternatives if they refuse to accept a coalition deal could be even worse. New elections could lead to poorer results for the SPD, while a minority government might mean the party ends up supporting CDU policies without having a say in the process.
BLOOMBERG
