German liberal leader signals bumps on road to ‘traffic-light’ coalition

The leader of Germany’s liberal Free Democrats has set strict conditions for joining a possible coalition with the Social Democrats and Greens after next week’s national election, demanding tax cuts, curbs on new borrowing and a return to pre-pandemic spending rules.

“The prerequisite for us joining any coalition is that we can’t have tax increases and we respect the constitutional debt brake,” Christian Lindner, leader of the FDP, told the Financial Times. “Whoever wants to do something else will have to look for another partner.”

With 11 days to go until an election that will decide who succeeds Angela Merkel as chancellor, polls suggest power could potentially pass from her centre-right CDU/CSU bloc to a three-party coalition made up of the SPD, Greens and FDP.

In the event of this so-called “traffic-light” tie-up — named for the parties’ respective colours of red, green and yellow — Lindner, a 42-year-old MP who has led the FDP since 2013, would be a leading contender to become Germany’s next finance minister and therefore one of Europe’s most powerful politicians.

But differences between the three parties will be hard to bridge. The SPD and Greens favour higher taxes, greater public investment and a redistribution of wealth to the poorest — demands that may prove difficult for the fiscally conservative, pro-business FDP to swallow.

Asked what would persuade him to team up with the SPD and Greens, Lindner told the FT: “They have to make us the right offer. But right now I lack the imaginative powers to see what that offer could be.”

Polls suggest the SPD has built a commanding lead ahead of polling day on September 26. A survey by Forsa on Tuesday put it on 25 per cent, with the CDU/CSU on 21, the Greens on 17 and FDP on 11 per cent.

The SPD numbers reflect in part the popularity of its candidate for chancellor, finance minister Olaf Scholz, who enjoys much higher approval ratings than Armin Laschet of the CDU/CSU and the Green candidate Annalena Baerbock.

If the SPD emerges with the most votes, Scholz might seek to team up with the Greens and the hard-left Linke party — currently polling at around 6 per cent. But a tie-up with the Greens and the Free Democrats would be more palatable to mainstream German voters.

Still, the ideological gulf between the FDP and the left-leaning SPD and Greens — particularly on European policy — will be hard to overcome. Speaking to the FT at his office in the Bundestag, Lindner insisted that Germany and other European countries should curb their spending after the big splurges seen during the Covid-19 pandemic. “Pressing on with an ultra-expansionary fiscal policy for Europe would be a big danger,” he said.

That stance puts him at odds with the Greens, who want to reform Germany’s debt brake — its constitutional curb on new borrowing — unleash a €500bn, 10-year investment drive and loosen the EU’s fiscal rules, which limit state debt to 60 per cent of GDP and budget deficits to 3 per cent. The EU is examining whether these rules, which were suspended when coronavirus hit, should be overhauled given the surge in public debt during the pandemic.

Christian Lindner with a supporter on the election trail. Differences between his FDP and the left-leaning greens and SPD will be hard to bridge © Constantin Zinn/EPA/Shutterstock

“It’s wrong to suggest that we do politics on credit, as the Greens are doing,” Lindner said, “especially when you think about the debt sustainability of certain eurozone member states.”

This resistance to reform would make the liberals a difficult partner for the Greens. “The problem with the FDP is it’s a one-issue party — all they care about is tax cuts,” said one senior Green MP.

Many in the FDP would prefer to combine with the CDU/CSU (whose traditional political colours are black) and Greens, in a so-called “Jamaica” coalition.

“Our members strongly favour Jamaica over other options,” said one FDP MP. “Mathematically, traffic-light has become more likely, but in terms of substance, I don’t really see it. Our programmes are so far apart.” 

If Jamaica becomes a viable option after polling day, it wouldn’t be the first time. Talks were held between the CDU/CSU, FDP and Greens after the last national election in 2017 but Lindner abruptly withdrew from them in November that year, saying it was “better not to govern than to govern wrongly”.

Such a formation might have a better chance this time, partly thanks to the warm relationship between Lindner and Armin Laschet: they both hail from the western state of North Rhine-Westphalia, where the CDU and FDP have governed together since 2017. But its chances tie-up have receded slightly in recent days with the conservatives’ slide in the polls.

“If the CDU/CSU are seen as the loser of this election, how can they be the ones to form a government?” said the FDP MP. 

Lindner expressed confidence in the summer that Laschet would win the election. Since then, he told the FT, he had been “surprised by the weakness of the CDU and by how fuzzy its policies are”.

But he added that he still believed that Laschet “has the more stable coalition options”.

Lindner conceded that despite their differences, the FDP, SPD and Greens did agree on some issues: all three wanted to see big investments in infrastructure, climate and digitisation, for example.

“But we don’t see any need to do that by taking on new borrowing,” he said. “We have a huge amount of private capital that’s looking to be invested.”

In similar vein, the FDP manifesto calls for Germany’s next government to sell its stakes in Deutsche Telekom and Deutsche Post and invest the proceeds in digital infrastructure.

Asked what kind of European policy he would pursue if appointed finance minister, Lindner said the FDP would be the “advocate of stability in Europe” and would seek to “reduce economic divergence” between EU member states. “But the way to do this is not through transfers, but by improving investment conditions in the private sector,” he added.

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