The Telegraph
Wednesday , February 5 , 2014
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- Coalition politics in Europe and in India

Indian political speculation currently revolves around the possible contours of coalition formation after the forthcoming general elections because it is regarded as unlikely that any party will gain an absolute majority. Coalition governments at the federal level in India have become the norm and are commonplace in democracies elsewhere, especially in countries where the system of proportionate representation is practised. The latest example of coalition formation has been seen in Germany, the most economically powerful country in Europe, whose policies are a critical determinant for the future of the European Union and the Eurozone. Angela Merkel has become chancellor for the third consecutive time, and leads a ‘Grand Coalition’ between her party and her main Opposition, the Social Democrats.

The predominant role played by Germany in Europe is not without its critics. In a recent poll, a large majority of Spaniards, Portuguese, Italians and Greeks rejected Merkel’s policies of tough love, that is, belt-tightening, austerity, balancing budgets, reducing debt, dismissing civil servants, cutting social services and privatizing State assets. The German-inspired reform package for indebted states in the Eurozone is strenuously monitored by the European Union, the International Monetary Fund and the European Central Bank, all of whom are commonly believed to be acting at Merkel’s bidding, and is a precondition for further disbursement of loans. In the case of Greece, the second tranche of the existing loan comes to an end this year, and the recession will still leave a fiscal gap of around five billion euros by 2016. A third loan, accompanied by further austerity measures, is under discussion.

Merkel is quite unfazed by criticism from the Eurozone’s indebted south, the ‘olive belt’ from Cyprus to Portugal. Referring to how Germany acquired its deep pockets by reducing labour costs and strengthening competitiveness, she has declared, “what we have done, everyone can do…we cannot drop the pressure on the south to reform”. Germany leads the European Union of 28 nations and the Eurozone of 18 with no heavyweight support or opposition; France has its economic problems and Britain is famously Eurosceptic and threatens, in an act of wishful thinking, to renegotiate the terms of its membership of the Union.

Europe’s coalitions, like those in India, are fabricated after elections and not before. But unlike India, coalition-building there is a process of long and detailed negotiation, where consensus on every foreseeable eventuality is hammered out on paper. The aim is centrist and the accommodation of incremental differences. In Holland, this document is called a regeerakkoord and is arrived at through the mediation of a respected veteran politician called an informateur, who may or may not become a member of the future government. In Berlin’s case, this procedure took three months and resulted in a 185-page agreement between Merkel’s conservative Christian Democratic Union and the Social Democratic Party, which was subsequently approved by the SDP’s members numbering about half a million. Under the accord, the SDP secures a minimum wage and lower retirement age; the CDU that taxes will not rise, there will be no new federal debt from 2015, and 40-45 per cent of power generation will be from renewable sources from 2025.

There had also been a CDU/SDP Grand Coalition in Merkel’s first term of office as chancellor from 2005 to 2009, but it had not been a happy experience for the SDP, which lost massive public support during that time — the usual case for junior parties in a governing coalition. This time round, the SDP has leveraged its partnership into gains for its lower-paid members and forced the CDU’s rightist sister party, the Bavarian Christian Social Union, to accept several social reforms. The SDP has also obtained six of 14 portfolios; the economy, energy, labour, justice, foreign affairs, and a new ministry of integration.

The end of doubts about a stable German government has come as a relief to European capitals, though with mixed feelings from the olive belt. The coalition will strengthen Merkel’s hands in the German parliament in regard to votes for German participation in bail-out measures, which had previously been tense and difficult, and for steps towards greater integration in the Eurozone, starting with a banking union. The CDU and the SDP have belied any hope that Europe’s healthy north would soften the squeeze on the indebted south in the interests of solidarity or even sentiment. Merkel and the SDP have agreed to support each other in the imposition of fiscal discipline, and oppose any obligations for the collectivization of national debt in the Eurozone. German leaders are acutely aware that German voters will not pay an extra cent for the supposedly extravagant olive belt.

The immediate first fruit of the new coalition has been the European governments driving forward a more centralized European Union by agreeing on a pact on dealing with failing banks. During the years of the Eurozone crisis, governments are believed to have spent some $2 trillion in support of ailing banks. Financed by the banking industry, the new plan is to raise $75 billion over the next 10 years to create a fund that will be managed by a new agency. This is part of a wider effort by the Eurozone economies to avoid future taxpayer-funded bank bail-outs and to build a banking union whose purpose is to stabilize the European currency as the basis for the return to growth. The proposed banking union will comprise three elements — a common banking supervisor will be created in the form of the European Central Bank, which will, together with the national supervisory authorities, monitor the health of all the major banks in the Eurozone. If a bank gets into trouble, the decision to bail it out, or let it sink, would be taken by a common resolution authority. A common deposit guarantee will be established by which a bank account holder in the Eurozone will have deposit guaranteed up to a maximum of $1,38,000.

In India, as the heavyweight parties,the Congress and the Bharatiya Janata Party, limber up for a contest of strength at the next elections, both of them will be painfully aware that they will probably have to find a supporting cast of bit players and regional parties, all led by mercurial prima donnas who will first extort a heavy price and then prove to be totally unreliable. No common agreement, however carefully crafted, will be of even short-term value in binding coalition partners to keep them in line with their commitments. The BJP and the Congress will doubtless have the largest number of seats in the new Parliament, but may fall short of an absolute majority, like the CDU and the SDP in Germany. Instead of a hamstrung coalition, is a ‘Grand Coalition’ of the Congress and the BJP out of the question? If they can cast aside their prejudices and inherited preconceptions, and set to work with an open mind and in a spirit of compromise on a common programme, they will find themselves not very far apart on a very wide array of subjects. Such complementarity in a grand coalition will provide for a functioning Parliament for the first time in decades and a spurt in good governance and economic growth. In five years, India could achieve what it has not been able to do in the past 65. During the last World War, the British Conservative and Labour parties joined hands to form a coalition government to safeguard the nation. India is now at a crossroads, an abyss is looming, and remedial action is required on a war footing. The solution lies in the two major parties burying their differences even for a five year period and working together to rescue the state. It is time to think the unthinkable.