MNI EXCLUSIVE: Election Spanner In Cogs For French-German Deal

--FDP Coalition Could Hit Macron's Closer EU Cooperation 

--Thinktank, MP Tell MNI Macron Will Need Rethink

--Greens, FDP Still Far From EZ Agreement, Brexit Slips Down the Agenda

By Tara Oakes

     BERLIN (MNI) - Germany's election result is set to derail French President

Emmanuel Macron's pitch for closer EU integration, scheduled originally with

much fanfare for Tuesday. Angela Merkel's CDU/CSU coalition comfortably topped

polls on Sunday -- but the Chancellor cannot be the ally Macron hoped for in the

heart of Europe while she struggles to build a coalition at home. 

     One CDU MP, Kai Whittaker, who bucked the trend of disappointing party

results to take Baden-Baden, told MNI in an interview that the result would draw

politicians' eyes inwards to domestic policy. 

     "The question is, do we want a common European economic and finance policy

-- with EU taxes, EU budget, EU bonds and stuff like that -- or not?" he said.

"I presume Macron is going to push forward on that idea and after the election

yesterday, there is no appetite in Germany towards spending more money on

non-German issues," Whittaker added. 

     The SPD, junior government partners for the last 4 years, have thus far

ruled themselves out of joining another grand coalition after a dismal showing

nationally, indicating they want to rebuild the party in opposition. Unless they

change their minds, Merkel only has one option for a majority coalition

government: a so-called 'Jamaica' deal with the liberal FDP and the Green party.

     If Macron's big speech covers the ground expected -- closer eurozone

economic and monetary integration, including a possible Eurozone budget -- it

may fall on deaf ears across the border. 

     The FDP, whose return to the Bundestag is a triumph for main candidate

Christian Lindner, will likely demand the ousting of Wolfgang Schaeuble in order

to take the prized finance ministry into their own hands. 

     If they do, closer European economic integration will get a kicking not

just from a chastened CDU, but from a party that campaigned on the back of

public hostility to debt mutualisation and propping up southern Mediterranean

economies. If Macron is hoping to rally the EU's economic powerhouse to a

strengthened EMU, he may have to return to the drawing board. 

     "With Christian Lindner you really have someone who said no finance

ministry, no budget for the euro. I think he will be even tougher in the euro

negotiations," think-tank DGAP's Claudia Schmucker told MNI in Berlin Monday.

     "Everything Macron wants, the FDP does not," she added. What of the Greens?

They benefitted from a surprise bump in polls to finish on 8.9% and would be the

final party required for the 'Jamaica' trio.

     For Whittaker, economic compromise could be possible between the parties --

leading them not too far from where Schaeuble's position is at present. Creating

a European Monetary Fund, as mooted by Commission President Jean-Claude Juncker,

could be a place to start.

     "That could be some kind of compromise, saying that we integrate more, we

have some more shared responsibilities, but also be more rigorous and tougher on

economic reform and progress in the member states," Whittaker told MNI. 

     But for him the key was some true soul-searching on Germany's refugee

policy, which he believed had led to the disappointing result for Merkel's

party. Coalition talks will be drawn-out and drag Merkel away from the global

limelight she has enjoyed over her previous terms, at least for a number of

weeks. 

     A renewed domestic focus will also drop Brexit to the back of the agenda in

German political discourse, where it was already too insubstantial for German

voters to merit even a mention in the TV debate between Merkel and SPD

challenger Martin Schulz. 

     Schulz, who has said he is staying on a SPD head, is notably harder on

Britain than fellow German political leaders. 

     After the results came in Sunday, he railed against the idea of a two-year

UK transition. But despite the softer tone likely from the FDP, the brutal truth

is that no-one in the biggest EU economy much cares about Brexit when, with the

rise of the far-right AfD, they have their own problems to sort out.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

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