Merkel's Weakness Compounds May's Problems

Although she is still trying, it appears that Angela Merkel will be unable to form a majority coalition government. The collapse of talks with the Green party and the FDP leaves Merkel with three distinctly unpalatable options. She could try to rule as a minority government with implicit support from the SPD, or try to convince the SPD to re-join the grand coalition, or wait until new elections are forced sometime next spring. Obviously, in the present environment, any new elections will be risky, potentially further eroding the power of not only Merkel's conservatives but also the SPD as well and giving the right-wing, xenophobic AfD another opportunity to expand its own electoral base despite its own internal divisions. But that seems to be Merkel's preferred option. (UPDATE: Merkel and the SPD seem to be rethinking their positions as the SPD has just agreed to talks about reviving their coalition.)

Meanwhile, Merkel's weakness will provide even more Brexit headaches for Theresa May and her Conservative colleagues. Already riven by internal chaos regarding the path of negotiations, May and the Conservatives seem to stumbling toward no agreement at all. EU negotiators recognize they have the superior negotiating position and are maintaining their hard line. At the same time, they seem to be getting fed up with the chaos on the British side. And with a weakened Merkel who may be facing yet another election, the chances of her being able or even willing to force tough compromises on the European side will be further diminished.

As usual, the Conservatives are once again misreading their European counterparts and engaging in wishful thinking. According to Jacob Rees-Mogg, Merkels' inability to form a coalition and the resulting "political weakness of the strongest E.U. state makes our negotiating position stronger." I seriously think not. In fact, as the director of the Center for European Reform says, "I don’t think it makes much difference to Brexit in the short term, because the positions of various parties in Berlin are all pretty hard-line on the issues. But it might matter in the long term, because if the negotiations get stuck, Merkel and Macron could intervene to get a deal. That might not happen if Merkel disappears, because the E.U. got used to her knocking heads together."

As slowly as any progress is being made in the separation negotiations, the situation on the domestic front is almost as rapidly deteriorating. The UK's respected Institute for Fiscal Studies (IFS) cut its forecast for productivity, earnings, and growth well into the next decade. Per person GDP in 2021 is now expected to be a whopping 3.5% below the forecasts of early 2016 and would possibly still be lower than in 2008, adjusted for inflation. The economy is not expected to grow by more than 2% per year in the foreseeable future and deficits will accordingly be higher than previously expected. According to the head of the IFS, "We are in danger of losing not just one but getting on for two decades of earnings growth. We will all have to get used to the idea that steadily rising living standards may be a thing of the increasingly distant past." He added that things will only get worse, saying, "This is not the end of austerity. It is not even nearly the end of austerity. There are still nearly £12bn of welfare cuts to work through the system, while day-to-day public services spending is still due to be 3.6% lower in 2022-23 than it is today."

At the same time, both business and people are fleeing the country and this includes some highly skilled labor. Over 120,000 Europeans have already left their jobs in the UK and departed for parts elsewhere in just the last year and a half. In the City, jobs are already moving to the continent at an increasingly rapid pace and in London construction workers and even coffee baristas are becoming harder to find. Talented and rich foreign students, who are critical to some schools' funding, are also no longer coming to the country's universities.

But nowhere has the immediate impact of Brexit been felt more than in the already beleaguered NHS. In the year following the vote, over 10,000 NHS professionals left the service. There are now over 40,000 nursing vacancies even as the number of registered nurses who are certified to treat in both the UK and the EU has dropped by 90%. As the Times notes, "Brexit seems certain to make it harder and costlier to recruit from the Continent, assuming that people will still want to come from there. Even the legal status of European Union citizens already living in Britain remains unclear, entangled in the stalled Brexit talks between Brussels and London. Many fear they could lose rights, job security, pensions and access to free health care."

There is a sad irony to this state of affairs and that is because the Leave campaign touted the millions of pounds that would be available to the NHS after Brexit. The slogan was 350 million pounds per week that was currently going to the EU would now be available to shore up the NHS. It was all a lie. And now the already severely stretched NHS is bleeding foreign talent because of the vote.

Meanwhile, the already difficult situation in Northern Ireland is also deteriorating and the Good Friday Agreement is in danger of collapsing. The government there has already been dysfunctional since the beginning of the year, when the ruling coalition collapsed when Sinn Fein left it in attempt to get DUP leader Arlene Foster to step down. Instead, Foster and the DUP became the key to allowing Theresa May to form a coalition government after her disastrous snap election. Since then, the Northern Ireland government has been at a standstill. In addition, Gerry Adams further added to the chaos when he decided to step down as leader of Sinn Fein in the hopes of thereby allowing the party to become a coalition partner in Ireland's government.

That move, however, leaves a power vacuum in Northern Ireland both on the nationalist and unionist sides and probably further reinforces Sinn Fein demands for reunification of Ireland, especially in light of Brexit and the fact that the UK government is now specifically aligned with the DUP due its status as a coalition partner. The border negotiations seem to be going nowhere and the Irish foreign minister recently trashed the UK negotiators saying they essentially have not made any serious proposals or promises regarding the future of the border post-Brexit.

All this has driven the ruling coalition further apart. Sinn Fein is now demanding that Irish language be given the same legal status as English and that same-sex marriage be recognized by the state. It has also given rise to the idea that a ruling government must not necessarily be a power sharing arrangement between the unionists and the nationalists, effectively voiding the premise of the Good Friday Agreement. The head of Sinn Fein's main rival nationalist party says, "I don’t mean to be dramatic or anything, but I do think the Good Friday Agreement is effectively dead." She ominously added, "I don’t think there’s any real support for violence, but you can see how quickly things can unravel. It’s very bleak, and it is something to worry about."

There is now a belief that a referendum on leaving the UK and becoming part of Ireland will come sooner rather than later, especially with the restrictions imposed by the eventual Brexit agreement, if there even is one, and if the border issue is not addressed satisfactorily. As one centrist, neither nationalist or unionist, leader said, "This is a more profound crisis than we’ve had at other times in the last 20 years." More dispiritingly, May and the Conservatives seem unable, or worse, uninterested in doing anything to help resolve the current impasse. And the longer the impasse continues, the more government services will deteriorate, prompting call for drastic action on both sides of the sectarian divide.

May must surely hope that the SPD does, in fact, join in another German grand coalition. The economy she is overseeing is deteriorating quickly, the prized achievement of the post-war UK government, the NHS, is increasingly under duress, and the rumblings for independence still exist in Scotland and now perhaps even more imminently in Northern Ireland. Without a strong German government to help forge consensus and compromise in the EU, it will be difficult to reach an agreement on Brexit. And waiting until a new German election next spring will bring the 2019 deadline for the break with the EU even closer and further enhance the probability of no deal at all. And even if the CDU-SPD coalition is revived, it is unlikely that the Germans will waste political capital on Brexit when they are so many other problems facing the EU itself.