BERLIN: German Chancellor Angela Merkel has a month to reach a deal with her coalition partners on pension reforms or face the risk of her government collapsing.
A new election would end Merkel's long dominance of the European Union's economic powerhouse sooner than expected as she has said she will not seek a fifth term as chancellor. It could also make Germany more introspective at a time when the EU wants leadership and unity in the face of Britain's likely departure.
Merkel's conservatives and the centre-left Social Democrats (SPD) forged a loveless coalition in March 2018, ending months of political limbo following an inconclusive election.
To woo the SPD, the conservatives agreed to introduce a higher basic pension, or Grundrente, for people who have been employed all their working lives. But some of the details were left open and talks on finalising the terms are deadlocked.
The impasse is the last straw for some SPD members, worried by the party's falling ratings. If no deal is reached on pension reform, they are likely to oppose staying in the coalition when the SPD decides on the issue at a congress on Dec 6-8.
"If there is not an agreement on the Grundrente, then it's going to get difficult in the coalition," SPD Secretary General Lars Klingbeil said this week.
A senior conservative, speaking on condition of anonymity, feared the worst.
"My own view is that if the Grundrente is not agreed, the SPD will pull out of the coalition and we will have new elections," he said. "So we need to be careful ... Elements of the SPD have a death wish."
Opinion polls show both Merkel's Christian Democratic Union (CDU) and the SPD would lose seats in parliament if an election were held now. This provides both with a big incentive to find a compromise on pension reform.
Merkel and the SPD's most senior coalition member, Olaf Scholz, said on Wednesday they would keep working together after welcoming a report on the government's work. But they differ in many areas and both said the government had a lot of work to do.
COMPROMISE PROVES ELUSIVE
The SPD wants a Grundrente, or guaranteed state pension, for people who work more than 35 years that is 10 per cent above the basic social-security allowance provided for the elderly.
It is intended to help combat poverty in later life in Germany’s ageing population, but who will be entitled to it is still to be decided and will depend on the outcome of coalition talks on whether and how to means-test potential recipients.
Some lawmakers in the CDU and some SPD members are resisting compromise because they want to sharpen their parties' profiles - blurred by being in a 'grand coalition' - and win back voters who are deserting them for fringe parties or the Greens.
The CDU wants to use public funds to help businesses and hold down the cost of any basic pension. The SPD wants to ensure its provision - even if means-tested - extends to the lower middle-class voters it needs to win over.
In the CDU, a split is opening between its leaders in government, who are showing some readiness to compromise, and senior figures in the parliamentary party, which is increasingly frustrated with the SPD and with the CDU governing leadership.
"I can only recommend my party friends not to give an inch," said Mark Hauptmann, who heads the conservatives' youth wing in parliament.
The coalition postponed until Sunday a meeting initially planned for Nov 4 that was intended to clinch a Grundrente deal because of the lingering differences.
The CDU's disagreements over how far to compromise reflect poorly on party chairwoman Annegret Kramp-Karrenbauer, whose status as Merkel's heir apparent is being undermined as she struggles to impose herself on the party.
One member of the CDU's executive committee, speaking on condition of anonymity, said no one in the CDU now knows "who's holding the baton".
Others say Kramp-Karrenbauer is just finding her feet and the party should wait until next autumn to decide on a chancellor candidate. The next national election is due in 2021.