Lowest Common Denominator

Germany still does not have a new government. The talks between Merkel's CDU/CSU Union and the social democrat SPD are stalling. In fact, the only real agreement seems to be on a a quota for women on corporate boards. But, the discussions about a minimum wage (the SPD wants €8.50);  mothers' pension (for mothers of children born before 1992); or the toll for foreigners on the Autobahn that the CSU wants are going nowhere. This weekend the CSU leader Horst Seehofer hinted at new election as an option. Only two things seem certain: this will be the longest time Germany has ever been without a new government; and the next government will likely be one based on the lowest common denominator.

Minimum Wage In Germany

Coalition negotiations between Merkel's CDU/CSU Union and the SPD will begin shortly. One of the major issues was the minimum wage of €8.50 per hour, that the SPD wants. Many German economists fear that jobs will be lost. They are right that this might be the case in the short term but in the long run they are absolutely wrong.

What's Happening In German Politics

First up, Germany doesn't have a new Government yet, but the Greens will not be Merkel's next coalition partner. This isn't really news, a so called grand coalition with the SPD (new labor) was much more likely from the start.

Second, Merkel prevented a new EU compromise on car emissions. She wants higher Super Credits for environmental friendly cars, which basically just means counting these vehicles more than once when calculating the average fuel consumption of the whole automotive manufacturer's fleet. I have written  about super credits (counting electrical cars more than once against the CO2 emissions of the whole fleet) before; and described why I think they are important:

Super credits have the potential to increase the production capacity of zero emission vehicles, and also give companies an incentive to accept lower profit margins on these, therefore Merkel was right to stop the current proposal.

 So, again I completely agree with Merkel to stop an idiotic regulation based on fantasy assumptions of how much development potential is left concerning conventional engines. Also, we in the current form the regulation favors plug-in hybrids. Plug-in hybrid only produce less CO2 if one ignores the fact that more needs to be used in the production for the second engine and that the current German electricity comes in large parts from coal and lignite.

Still, CO2 regulation has become important for another reason. The CDU's biggest donor is the Quant family. The BMW shareholders gave €690,000 to Merkel's party this week. Of course, one would have to be an idiot to think that the Germany's biggest party can be bought with €690.000, still the timing is absolutely mind boggling.

Instead of a discussion about the size of super credits (should electrical vehicles be counted twice or thrice against the rest of the car fleet, for example), we now have a discussion about corruption. Super credits make sense since the buyers of large cars will cross finance zero-emission vehicles and thereby make them cheaper, but I have not seen a single article in the German media talking about this fact.

Other than that nothing will be happening until the coalition contract is written, which might take a while. Also there is a very small chance that we wont see a grand coalition in the end which would mean that there would be new elections, but that is extremely unlikely.