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FM AMEMBASSY BERLIN
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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNFRG/FRG COLLECTIVE

C O N F I D E N T I A L BERLIN 001614 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 06/08/2021 
TAGS: PGOV GM
SUBJECT: GERMANY'S GRAND COALITION: THE RETURN OF POLITICS 
 
REF: BERLIN 846 AND PREVIOUS 
 
Classified By: Acting PolCouns John Lister.  Reason: 1.4(b) and (d) 
 
¶1. (U) Summary.  After a winter and early spring in which the 
internal troubles of the SPD provided almost the only 
domestic headlines, politics returned to Germany in May as 
the government turned its attention to a series of domestic 
issues: passage of an anti-discrimination law and tax hikes 
(both on the rich and for all through the VAT), reform of the 
health care system, and amendments to the Hartz IV 
unemployment insurance scheme.  Dealing with these 
contentious issues, after a "honeymoon" spent demonstrating 
the viability of the Grand Coalition,  has prompted new 
debate within the coalition and cost the government and the 
Chancellor a significant measure of support according to 
polls.  Striking, too, is the beginning of sniping at the 
government from CDU Ministers-President in several western 
states.  While acknowledging that partisan feeling has risen, 
contacts in the parties, government, and Bundestag have told 
us that they see nothing dramatic in these developments, that 
work of both the cabinet and parliament continues to be 
professional and largely non-partisan, and that until at last 
2008 they see no real threats to the Grand Coalition's 
stability and survivability.  The principle "condemned to 
success" continues to guide top-level thinking, we are 
assured.  End Summary. 
 
The Domestic Agenda: A Recipe for Strife 
---------------------------------------- 
 
¶2. (U) For its first four months, the Grand Coalition and 
Chancellor Merkel carefully avoided contentious domestic 
issues, focusing on foreign affairs and preparing for state 
elections in east and west.  With these behind it, the 
government in May passed a VAT hike, called the largest tax 
hike in German history -- a step that was bound to cause it 
trouble.  In addition, the Bundestag passed an 
anti-discrimination law that has particularly hurt the 
CDU/CSU side of the coalition.  During the election the 
CDU/CSU had promised not to pass a law that would exceed 
European Union requirements, but it ended up agreeing to a 
law that went so far that it pleases even the Greens, 
according to a Green staffer.  These two deeds precipitated a 
slide in the government's and Chancellor's poll standings. 
 
¶3. (C) At the end of May, the monthly "Deutschland Trend" 
poll by Infratest-Dimap showed a nine percent fall in 
satisfaction with the government since early May, from 40 
percent to 31 percent.  Satisfaction with Chancellor Merkel 
fell by the same amount, to 63 percent -- still very high.  A 
May 28 poll for Welt am Sonntag, which sought to measure 
confidence in the government, showed similar drops.  Only 33 
percent believed the government could resolve Germany's 
problems and only 36 percent thought Angela Merkel was a 
strong Chancellor (vice 42 percent in the fall).  However, 
Juergen Hofrichter, Director of Election research for 
Infratest-Dimap found little surprising in the numbers.  The 
tax increase in particular, was the likely source of much of 
the unhappiness and he saw, at this point, nothing that could 
be identified as a definite trend.  He noted in particular 
the ambivalent public attitudes toward government as a whole: 
 In a May Deutschland Trend poll, 58 percent said they 
"rather agreed with" both of the following: 1) that the Grand 
Coalition isn't solving problems any more than the old 
government and, 2) that only a Grand Coalition can carry out 
necessary reforms.  Further muddying the picture, 52 percent 
in May said the coalition had been performing well. 
 
¶4. (C) Beyond the direct effects on public opinion, the 
anti-discrimination package and aspects of the federalism 
reform and Hart IV led notably to criticism from CDU 
Ministers-President including Roland Koch (Hesse), Christian 
Wulff (Lower Saxony), and Juergen Ruettgers (North 
Rhine-Westphalia) that the SPD was getting its way too much 
in government councils.  Michael Guentner, Office Director 
for CDU/CSU Bundestag Caucus leader Volker Kauder (a Merkel 
ally) has told us that the CDU is suffering from a delayed 
realization that the election victory was far from complete 
-- the CDU/CSU and SPD are virtually equal partners in 
government.  Even though the CDU may hold the Chancellor's 
office, Angela Merkel and the party have to be willing to 
make significant compromises.  SPD Vice-Chancellor 
Muentefering also leapt to the Chancellor's defense, calling 
on CDU state leaders to support their Chancellor.  Though 
this was at first seen as a sign of SPD-CDU/CSU conflict, 
Merkel has since admitted that she was aware in advance of 
Muentefering's remarks.  It is too early at this stage to 
tell how much this strife will affect the public standing of 
the Grand Coalition.  However, CDU staffer Olav Goehs was 
sanguine -- seeing party tactical considerations behind the 
CDU Minister-Presidents' maneuverings and a predictable rise 
in partisanship between SPD and CDU/CSU now that they have 
both established the basic workability of the coalition and 
have begun to deal with more contentious issues. 
 
Impact on Government: Allegedly Minimal 
--------------------------------------- 
 
¶5. (C) Despite the acknowledged strains -- hyped by media 
focus -- the government has continued to function well.  Both 
Guentner and SPD HQ official Engel offered us variants of the 
argument that, for both sides, the coalition must succeed if 
the parties are to mount a credible campaign for outright 
victory in 2009.  Relations between Kauder and his SPD 
counterpart, Peter Struck, remain excellent, and substantive 
discussions between the Union and SPD caucuses are not 
ideologically driven, according to Guentner.  Both Guentner 
and Engel also acknowledge that the government is benefiting 
from a rare, extended period (March 2006 to spring 2008) 
without major competitive elections, which facilitates 
non-partisan cooperation.  For example, the Office Director 
for Minister of State Hildegard Mueller, responsible for 
Health Reform, reports that cabinet negotiations are making 
steady progress in a dispassionate, businesslike atmosphere 
with both sides showing the will to find a compromise.  The 
Hartz IV issue is still unresolved and will not be tackled in 
depth until after the summer break, but our contacts also 
assert that a compromise will be found.  While there had been 
speculation that some states might seek to block the new 
Anti-Discrimination law in the Bundesrat, the CDU's Goehs has 
reported that all will vote for it, though some will offer a 
rare explanation of their vote.  The media are also reporting 
that SPD Bundestag Caucus leader Struck now believes the 
federalism reform package can be passed by the government 
before the summer recess, as originally planned. 
 
Stable Government 
----------------- 
 
¶6. (C) 2006 was likely to be the year in which 
over-optimistic public expectations of the Grand Coalition 
fell.  However, read all together, the poll results do not 
suggest a permanent or catastrophic loss of support for the 
government -- Chancellor Merkel's personal rankings in 
particular remain quite good.  The widespread view that the 
sinking polls, the rise in public partisanship, and the 
maneuverings of CDU "state princes" are normal and were to be 
expected is also enabling the government and parliamentary 
leaders to respond calmly and to carry on with business as 
normal.  We see little on the horizon that can be considered 
likely to pose a serious challenge to government stability 
for the balance of 2006 and into 2007.  The real tests seem 
likely to come, according to the SPD's Engel and others, in 
late 2007 when political leaders begin to focus on the 
important state elections in spring 2008. 
BAUMAN