A German 'grand coalition'?

Germany goes to the polls in two weeks' time in an election dominated mainly by economic issues and in which the two main candidates for Chancellor - Christian Democrat Angela Merkel and Social Democrat Frank-Walter Steinmeier - have served together in a coalition government for the past four years.

Merkel has made it clear she would prefer to govern in a coalition with the liberal FDP, rather than the Social Democrats (SPD), and is hoping the two parties will be able to form a parliamentary majority after the election.

Steinmeier, on the other hand, whose SPD is trailing far behind the Christian Democrats (CDU), can only hope to deny an outright victory for Merkel and force another grand coalition.

Understandably, it's the economy that has dominated the electoral campaign. Chancellor Merkel has been praised for her handling of the financial crisis, and many German voters consider her a safe pair of hands.

Merkel was instrumental in spearheading European efforts to increase regulation of global markets, while at home she pushed through a stimulus package worth €50 billion. The CDU leader is proposing modest tax cuts, financial market reform and improved childcare in a bid to secure a second term.

The Social Democrats are promising to create four million new jobs over the next decade, and Steinmeier is proposing tax cuts and state handouts for low-income groups to be financed by a wealth tax and a levy on stock transactions. The SPD's job creation plan has been ridiculed by the CDU, which has called it a "desperate move to prop up a moribund SPD". Steinmeier, on the other hand, has warned that a CDU-FDP coalition would drag Germany back to the "neo-liberal dark ages".

The environment is also an important issue in the election, with the Christian Democrats pledging to scrap Germany's 2002 nuclear phase-out accord (agreed to by the then SPD-Green government) and extending the lifespans of some existing plants beyond the 2020 deadline. Merkel is arguing that nuclear energy should be part of the country's energy mix.

The CDU is also planning to cut Germany's carbon dioxide emissions by 40 per cent over the next 10 years and to increase the amount of energy generated from renewable energy sources to 30 per cent.

On the other hand, the Social Democrats want to reduce the country's dependence on oil and get half its power from renewable sources by 2030. Unlike the CDU, Steinmeier is totally committed to the 2002 nuclear phase-out accord, which means all the country's remaining nuclear power stations would be decommissioned by 2020. The SPD have also pledged to create jobs through the support of energy-saving and environmentally-friendly industries.

Despite a very high personal rating of 53 per cent for Merkel, the German Chancellor cannot take victory for granted. True, Steinmeier enjoys a personal rating of only 20 per cent and his SPD suffered a historic low of 20.8 per cent in June's European Parliament elections.

However, the CDU suffered unexpected losses in two out of three regional elections last month, and many in Merkel's party are urging her to convert her personal popularity into votes for the Christian Democrats by adopting a more high-profile campaign.

Of course, the performance of the three smaller parties - the Greens, FDP and the Left Party - will be crucial to the outcome of the election. All three did well in last month's regional elections and observers will be particularly focused on the Left Party - made up of left-wing SPD defectors led by Oskar Lafontaine and former East German Communists - which pursues a radical left-wing economic policy. In 2005, it surprised everyone by winning 54 seats, three more than the Greens. So what are the possible coalition possibilities after the elections? Merkel's preferred option, a victory for the CDU and pro-business FDP, is possible, but the FDP has a history of disappointing performances at a national level. However, one cannot overlook the fact that the FDP, led by Guido Westerwelle, doubled its share of the vote in all three regional elections last month.

Another possibility is a coalition between the CDU and the Greens, which, although unthinkable a few years ago, does not sound too far-fetched today. After all, the city-state of Hamburg last year formed the country's first such coalition, which seems to be working well.

An obstacle to such an alliance is the parties' difference over nuclear energy. Three other possibilities, namely a CDU-FDP-Green coalition, an SPD-FDP-Green coalition and an SPD-Left-Green coalition are highly unlikely. The Greens have ruled out joining with two centre-right parties, the pro-market FDP would find it very difficult to govern with the SPD, and the SPD has ruled out forming a coalition on a national level with the Left Party.

Of course, the possibility of another grand coalition between the Christian Democrats and Social Democrats is quite possible; many would say quite likely in view of the German political landscape. That might not be a bad thing as over the past four years the CDU and SPD defied predictions and proved that they could govern together.