German new government remains out of sight

German Chancellor Angela Merkel's party decided on Monday to start exploratory talks with the main opponent at the end of this week. A coalition agreement, however, is not expected to be reached smoothly. One week after a federal election, Germans still don't know what will their future government look like. Lacking a majority in the parliament, Merkel's conservative bloc of Christian Democratic Union (CDU) and its Bavarian sister party Christian Social Union (CSU) needs a partner to rule the Europe's largest economy in the next four years. Its current ally, the pro-business Free Democratic Party (FDP), crashed out of the parliament with a poor election result. After a senior conference here on Monday, CDU announced that it would start exploratory talks with the main opponent, the Social Democratic Party (SPD), at 13:00 (1100 GMT) on Friday. Formal negotiations on forming a coalition, however, were not yet scheduled. A repeat of the so called "grand coalition" as in Merkel's first term in 2005-2009 is not expected to come out easily, despite the support of a majority of German citizens. The main hurdle is their different views on various domestic policies, including tax increases and setting a national minimum wage. During its election campaign, SPD stressed greater social justice and reiterated the plan to introduce a national minimum wage of 8.50 euros (11.35 U.S. dollars) per hour. The party also wants to raise taxes on incomes above 100,000 euros to 49 percent from 42 percent. However, Merkel said such tax hike plans would risk spoiling the good situation in the country. The CDU/CSU rejected tax increases in its campaign and supports minimum wage deals struck by employers and trade unions in different industry sectors and regions. Over the weekend, officials of the Union ruled out any compromise of their stance. Finance Minister Wolfgang Schaeuble dismissed a previous report that he suggested compromise on the issue of tax rises in an interview with Bild newspaper. An easy compromise from SPD is also not expected. Last Friday, 200 SPD representatives agreed to talk with the union after a discussion of nearly four hours. According to SPD's chairman Sigmar Gabriel, any ultimate coalition agreement will have to be agreed in a vote of SPD's 470,000 members. A recent survey showed that 65 percent of SPD members don't want their party to ally with the Union as they did eight years ago. SPD general secretary Andrea Nahles said at a press conference on Monday that the negotiations would take a long time, and the forming of a new government were expected to be ended up "in December or January." SPD are not under time pressure, he said. The industry, however, has called for a new stable government under which various domestic challenges could be solved as soon as possible. Before the federal election, industry bodies including Federation of German Industry (BDI) and the HDE trading retailer association called the new government to review a subsidy policy for the nation's ongoing energy transition in order to guarantee the security of energy supply and economic competitiveness. "The economy wants a stable government," Eric Schweitzer, president of the German Chamber of Industry and Commerce (DIHK), said on Monday. He figured out in an interview that issues such as energy transition, infrastructure investment and fiscal consolidation concerned companies most. All of these needed to be solved by the new government. Theoretically, Merkel's conservative bloc could also ally with the Greens to reach a majority in the government, despite the fact that the two sides are far different on various issues. CDU's general secretary Herman Groehe said on Monday that exploratory talks with the Greens were planned in the next few days. The Greens has similar demands as SPD, such as tax increases and national minimum wage. With a 8.4 percent of vote in the election, however, the Greens has a much weaker bargaining power than SPD, which gained 25.7 percent. German president Joachim Gauck on Monday invited leaders of the four parties in the new parliament for one-on-one meetings this week in his presidential palace in Berlin in order to avoid potential political standstill. If no coalition agreement could be reached, the president could call for a new election.