Explainer-Upping the tempo: Germany's coalition dance heats up

By Thomas Escritt

BERLIN (Reuters) - Olaf Scholz wants to wrap up the negotiations that should make him Germany's next chancellor by Christmas. Friday's agreement between his Social Democrats, the Greens and the Free Democrats on opening coalition talks are a big step towards that goal.

But their barebones agreement, which includes commitments on climate change, not hiking taxes, simplifying immigration, the minimum wage and not imposing a motorway speed limit, leaves much to be thrashed out by specialist party working groups.

Over the next two months, policy experts must fill in the many gaps left in the 12-page agreement they have reached. In 2018, the full coalition deal between Angela Merkel's conservatives and the SPD ran to 175 pages, and contained specific commitments on legislation the two parties would enact.

A deal is not guaranteed, but a breakdown in talks would be a huge shock: in modern German history no would-be coalition parties have ever backed out after having agreed to full coalition talks. Three-way talks in 2017 collapsed at an earlier, exploratory phase.

If they did, President Frank-Walter Steinmeier would have to step in, but this would be uncharted territory.

HOW TO BALANCE THE BOOKS?

The parties are committed to not raising taxes, but both the Greens and the SPD have made extensive spending commitments as part of their promise to create a more egalitarian society.

One fix could be to concentrate some of that spending in areas that matter to the tax-shy FDP, for example by investing heavily in digital infrastructure.

The deal promises a "decade of investments in the future" - without scrapping the totemic debt brake enshrined in the German constitution. A promise to tackle tax avoidance could help plug the gap.

WHAT ABOUT EUROPE?

The deal contains warm words about the European Union but many details must still be resolved: the FDP still opposes the EU debt union that many in the Greens and the SPD are keen on.

The Greens favour a common EU fiscal policy to support investment in the environment, research, infrastructure and education.

The SPD regards the European Union's post-pandemic recovery package as the basis for building new trust in the EU project and has spoken of taking steps towards a fiscal union.

AND THE WIDER WORLD?

The Greens and the FDP are more wary of China than the SPD or the conservatives, agreeing that Chinese firms should have no part in the building of Germany's next-generation telecoms networks to keep them secure.

The Greens say the Nord Stream 2 pipeline, which will transport Russian gas to western Europe, will increase Germany's reliance on Moscow for energy, and on the fossil fuels that are so damaging to the environment, and say it should not be allowed to come into operation.

The agreement says Germany must diversify its energy supplies, but does not touch on specific issues and makes no mention of Russia or China.

LONELY STANDS

In some areas the Greens are a lonely minority in German politics. Unlike its prospective coalition partners or Merkel's conservatives, they oppose increasing German military spending to NATO's target of 2% of economic output.

Despite warm words about NATO, the initial agreement is silent on how defence spending should develop.

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(Reporting by Thomas Escritt, Editing by Gareth Jones)