Election Run-up Business Hopes for Center-Right Government

Strong results for the FDP in regional elections have increased hopes for a business-friendly center-right government coalition after the September elections.
The next government's king maker? Picture source: DPA

For business leaders, Sunday’s election in Germany's most populous state produced a dream result that heralds a possible return to a center-right government for Germany in the September general election.

North Rhine-Westphalia, a traditional stronghold of the center-left Social Democrats, fell to Chancellor Angela Merkel’s conservatives, and a surprisingly strong showing for the pro-business Free Democrats (FDP) means the state will likely get a conservative coalition with the FDP.

That’s the constellation preferred by many in Germany’s business community, as the party leans toward tax cuts, government spending restraint and deregulation.

The FDP has been the junior partner in national coalition governments for a total of 45 years since 1949. It crashed out of parliament in 2013 but has made a comeback under its leader Christian Lindner, boosting its chances of reassuming its old role as kingmaker in German politics.

North Rhine-Westphalia was the third regional election win this year for Ms. Merkel’s Christian Democratic Union (CDU), providing them with powerful momentum as they head into a election on Sept. 24.

Aversion to her deeply controversial open-door refugee policy appears to have been outweighed by her steady leadership and status as an antidote to right-wing populism following the Brexit vote and the election of Donald Trump.

The number of migrants entering Germany fell sharply last year to fewer than 300,000, from 900,000 in 2015, due to the closure of borders by neighboring countries and an EU migrant deal with Turkey. And her party is still seen as stronger on law and order than the SPD, which is an important factor following terrorist attacks last year.

We need freedoms instead of regulation. The focus must be on generating wealth rather than on how to distribute it. Ingo Kramer, president of the German Employers' Associations

It’s early days yet, but business leaders and conservative lawmakers are already voicing hope for a center-right government.

“We need freedoms instead of regulation. The focus must be on generating wealth rather than on how to distribute it,” Ingo Kramer, the president of the Confederation of German Employers' Associations (BDA), told Handelsblatt.

CDU lawmaker Thomas Strobl said: “Without being over-confident, that’s a nice signal for the period up to September 24.”

The yearning of the business community for a shift away from Ms. Merkel’s current grand coalition of conservatives and Social Democrats is reflected in party donations.

The CDU and FDP have together received €1.1 million ($1.1 million) in donations this year, more than at any time since the 2009 election year when they won enough votes to form a government.

In North Rhine-Westphalia, the two parties need to resolve differences in security. The FDP places a greater emphasis on data privacy and opposes CDU plans for stronger video surveillance and phone data retention — but those obstacles seem surmountable given the amount of common ground on economic policy.

If they do agree to govern together in the industrial north-western state with a population of 17 million, they’ll provide themselves with strong momentum for the general election.

An alliance with a majority of one or two votes quickly leads to problems. Michael Fuchs, CDU MP

Martin Schulz, the SPD’s new leader running against Ms. Merkel, has angered business chiefs with pledges to prolong the payout of unemployment benefits, boost government spending and focus on promoting social justice.

They’re fed up with Ms. Merkel’s left-right government which has presided over billions of euros in welfare increases over the last four years and shunned the kind of welfare reforms it has been exhorting Greece and other high-debt nations to implement.

Mr. Kramer said the coming years would be decisive for Germany’s bid to tap into the opportunities provided by digitalization.

“We need governments that focus on growth and competitiveness and counter the shortage of skilled workers with a major push on education,” he said.

However, conservative lawmakers have warned that a center-right coalition in North Rhine-Westphalia and at the national level may not have a sufficiently strong majority to govern effectively.

“An alliance with a majority of one or two votes quickly leads to problems,” warned Michael Fuchs, a senior conservative lawmaker in the German Bundestag, the lower house of parliament.

The last center-right coalition was so divided over a bailout for Greece that Ms. Merkel needed votes from the SPD to push it through parliament in 2012. If the Greek crisis were to erupt again, she would face similar trouble given the number of opponents in her own ranks to providing more money. Mr. Lindner, the FDP’s leader, has openly called for Greece to quit the euro zone.

That’s likely to have been one reason why Ms. Merkel on Monday refrained from openly backing a center-right coalition and didn’t recommend a choice of partner to the victorious regional conservatives in North Rhine-Westphalia who are now setting about holding talks with other parties to form a government.

Daniel Delhaes reports on politics, transport and airlines from Handelsblatt's Berlin office. Thomas Sigmund is the bureau chief in Berlin, where he directs political coverage. To contact the authors: [email protected], [email protected]