UNREST IN THE TWO PARTIES

||One week after having finalised the coalition agreement, there is unrest and conflict in both parties concerning the agreement. In the CDU there is criticism on the allocation of ministries and demands for personnel renewal; In the SPD, after the resignation of Martin Schulz, an agitated leadership crisis has broken out, which highlights the challenging situation within the party.

1. SPD in leadership crisis – quarrelling about the Great Coalition

Following the resignation of Martin Schulz, a leadership crisis has broken out within the SPD, which is damaging the authority of the entire political leadership. The change in the party leadership at the end of the coalition negotiations was not sufficient move to keep Martin Schulz in the potential government as Foreign Minister. After only two days, the pressure coming from within the party itself – above all from the notoriously Great-Coalition-sceptical North Rhine-Westphalian party branch – grew to a point leading to his resignation possible Foreign Minister.

The than triggered debate on the legitimacy of leadership decisions has damaged the new leadership duo Nahles/Scholz, before it coming into office. By deciding in favour of Olaf Scholz, as provisional SPD-chairperson until April, and the unanimous nomination of Andrea Nahles as candidate for this office, the party's executive board tries to refocus the debate back onto the political issues.

The new duo could well be the nucleus of a promising renewal of the SPD. As Andrea Nahles stands for a change of generations and, with her dual function outside of the government, could act as a clear independent voice of the SPD in relation to the CDU. Even more, since she has recently increased her authority within the party, thereby credibly representing the SPD. She and Olaf Scholz share a long-standing trustworthy relationship, which developed under the chairmanship of Sigmar Gabriel, whom both wanted to evict from his leadership position. In addition, they both come from different fractions of the party, thereby representing the majority of the party base.

On the background of discussion on personnel, the whole unrest within the SPD has lead to a fundamental mistrust of the entire leadership. This is the reason, for the candidacy (without any chance) of the Lord Mayor of Flensburg, Simone Lange. In simple terms the procedural aspect is responsible and not some political issues. In the next two weeks, this critical self-perception will determine the public debate on the member survey.

Although it is necessary to distinguish between the excitement of the party officials, who are always involved in personnel matters, and the general membership, the survey has a different character than the one four years ago (76% agreement with 78% participation).

The debate will be decided less on the content of the agreement, in which the SPD has enforced more than its share of votes would have suggested, but rather focus on the fundamental strategic question of whether the Great Coalition is the right way for the SPD. Despite the existential uncertainty in some parts of the party, it is more likely that a majority will vote in favour of the agreement, under the pressure of the even worse alternatives (new elections, minority government). A clear prediction is not feasible at this stage of the process.

2. Merkel is under criticism too – but untouchable

Also Angela Merkel must listen to open criticism within the CDU. Dissatisfaction with the allocation of ministries has lead to an overall request for renewal. This is only the beginning of the debate that has just started within the CDU, also looking at who and how her succession will be dealt with.

Angela Merkel can observe this calmly since she has the freedom not having to strive for re-election in four years' time and thus being untouchable. For her it is crucial to defend her concept of German politics as long as possible. The dispute over the direction of migration policy that has arisen in the past legislature has not been resolved and carries on within the different views on the deepening of European integration. Therefore, the demands for a renewal of personnel is not only about a necessary rejuvenation of staff, but also about the political path. It is safe to say that Angela Merkel does not share the sympathies of Ziemiak, Spahn and other politicians within the CDU for the Austrian chancellor Kurz.

Likely, Merkel's goal will be to push as much as possible through together with the SPD in the next four years'. This will (together with Macron) enable her to safeguard her political heritage. Therefore, the agreed allocation of ministries is difficult for the CDU, but appropriate for Merkel's goals. In this respect, we can expect struggles for leadership also within the CDU, but they will be blocked by the chancellor in office during the next four years. That much could be deducted from the self-confident interview with ZDF on 11 February.

3. Success of the Great Coalition is decisive for the future of both big parties

The difficult start of the Great Coalition is an expression of the critical situation of the German people's parties. It remains to be seen whether both parts of the coalition have the strength to master this challenge and whether the party system that has existed in Germany for decades will prevail. Both parties have to win back the trust of the people for which successful governance is a condition – permanent arguments or mutual paralysis would exacerbate the crisis at the next election.


Michael Donnermeyer is a Member of the Board in the Berlin office of CONCILIUS.

Posted on February 14th, 2018

COALITION OF THE UNWILLING: A LOT OF MUST, LITTLE WANTING

||After tough negotiations, the coalition agreement has been finalized. CDU, CSU and SPD have agreed on the inevitable, however internal resistance in both the SPD and the CSU has not been eliminated. The coalition is a connection of weakened parties, being forced upon them by the political situation after the end of the Jamaica explorations. The program for the next four years seems rather unambitious.

1. Coalition agreement: many small compromises, few key concepts

The coalition agreement is a document of thorough politicians, who have come to terms in many details. In some areas, however, the fundamental differences between the coalition partners have remained clear, such as on labour market, health and migration policies. The compromises reached on topics that were not particularly in the public interest lack a powerful dynamic. Thus, the agreements on climate and energy policy have been achieved calmly, they are characterised by an absence of ambition, thereby not facing the unavoidable challenges lying ahead (new regulatory framework for energy pricing through the further expansion of renewables and of e-mobility as well as the next steps on climate policy). The overall impression remains scattered, even on the central issues such as digitisation and, above all, the future European policy, where a clear and focused orientation is not visible. The proposals of Macron are in principle welcomed, although the different degrees on the further deepening of the European Union have not been addressed.

Germany will have a stable and predictable government, but the dynamic and momentum, which were triggered by Macron's election, can hardly be perceived. The SPD and the CDU/CSU have put their disparities aside in order to achieve a coalition given that there is no other alternative possible and renewed elections would lead to a similar constellation. Powerful impulses can neither be seen in the agreement nor are they to be expected in view of the political formation of the parties involved.

2. Merkel is weakened – The old governance method prevails

Angela Merkel has played a less influential role in the formation of this government. With the exception of speeding up the pace at the end of the process, due to increasing impatience among the general public and the European partners, there was no impulse from her in terms of content. Instead, she let others negotiate. On the one hand, this reflects her usual technique of steering in the background, but on the other hand, it is also an expression of her political weakness. On many crucial questions, such as the further European integration or a modern migration policy, she expects the SPD to push for the required reforms in Europe. In any case, her speech in Davos on strengthening Europe’s position at the international level shows that she is politically closer to Schulz, than to the point of view within her own party. By promoting Wolfgang Schäuble – who holds some reservations on the way forward in the EU – she sent a clear message. Furthermore, there is no debate on the European policy within her own party or even publicly.

Consequently, she finds herself in a defensive position within her party the CDU, a situation, which is challenging in view of shaping the transition period to her own succession. After her re-election this issue will dominate her mandate and further undermine her power.

3. SPD paralysed by internal contradictions – Members’ voting will bring no clarification

The situation of the SPD is far more complex. The negotiations have publicly demonstrated the SPD's inner struggle. A segment of the party – with good rea-sons also for many supporters of a Great Coalition – does not want this coalition. The party leadership, which must take the viewpoint of the coalition agreement, has few constructive arguments at hand. The most compelling reason is the fatal lack of an alternative. New elections are currently the last thing that would strengthen a disrupted SPD. With the defensive argument of having no alternative, the weakened SPD leadership is likely to succeed in winning a majority of the members to vote for the agreement. But it is not certain. And even if there is green light for another Great Coalition, none of the party's fundamental and strategic questions would be resolved. The party leadership enters weakened and divided into an unwanted government. The discussion about the future of the party leader, Martin Schulz, is only the top of the iceberg. The strengthening of Andrea Nahles as the central political figure outside the government is intended to give the SPD a certain degree of independence from the government

4. Schedule

The coalition agreement will be put to the vote of the SPD members, from 20 February until 2 March. The results will be announced on 4 March 2018. The government can set-up the following week


Michael Donnermeyer is a Member of the Board in the Berlin office of CONCILIUS.

Posted on February 7th, 2018

SLOW START OF THE COALITION NEGOTIATIONS - BUT AMBITIOUS SCHEDULE FOR THE WORKING GROUPS

||Today’s Friday saw the official start of the coalition negotiations. After a very slow beginning due to coordination difficulties within the SPD, Chancellor Merkel now surprisingly presses the pace: the coalition treaty shall be concluded within one week.

1. SPD in difficult condition – Merkel presses the pace

While the CDU/CSU has quickly assembled the negotiating delegation includ-ing working groups, preparations for the SPD took considerably longer. CDU/CSU moves now at a fast pace and, four months after the election, has the public opinion on its side. However, the originally planned start of the negotiations on Wednesday had to be postponed at the SPD's request.

However, surprisingly, the delegations have agreed to speed up the pace. Contrary to previous timetables of both parties, the working groups are expected to complete the negotiations about substantive political issues within one week thus the contract shall be concluded at the beginning of February. This tough schedule apparently stems from Angela Merkel, who now wants to openly demonstrate her capacity for action and her strength by means of procedure.

The ambitious schedule exerts pressure on the SPD, which dealt with substantive and strategic issues in a long closed meeting on Thursday. Also, putting together the working groups took longer than projected. The reason for this is a pressured party leadership having emerged weakened from the party convention on 21 January. Concerns about the forthcoming member survey and unsettled discussions about the best (also personal) positioning for the potential coalition make the SPD appear weak; little authority is being assigned to its leadership.

Against this background, Angela Merkel appears calm and relaxed, and she does not comment on any political issue. By pressing the pace, she gives the impression of leadership and determination. Also for her the negotiations are important to organize a party configuration beyond political issues in order to successfully shape the transition period to their succession.

2. A coalition treaty is possible

Beyond these "big" questions regarding the strategic positioning of a Great Coalition, whose partners together lost 14% of votes in the parliamentary election last September, it should be possible to find compromises on the concrete issues of the coalition treaty in all working groups. This also applies to the conditions set out at the SPD party convention in the three areas of health, family reunification and fixed-term employment contracts. In this respect, the tight schedule does not mean an excessive demand for the experts being familiar with their subjects.

The crucial point for SPD’s member survey will be less the issues of the coalition treaty, but rather the fundamental direction for the party: Great Coalition or not? Here, one (negative) argument gets ever greater weight in the end: the alternative of re-elections with the same outcome at best would not change the party's precarious situation.

3. Schedule

The ambitious timetable is a signal in itself - it is intended to demonstrate vigour and the ability to govern. If successful, the formation of a government might be possible in the Parliament’s session week of end of February/beginning of March.


Michael Donnermeyer is a Member of the Board in the Berlin office of CONCILIUS.

Posted on January 26th, 2018

SPD VOTES FOR ENTERING INTO COALITION TALKS

||With an extremely slim majority, the SPD has decided to enter into coalition negotiations with the CDU/CSU. At a very controversial party convention, the delegates focused on the strategic question of co-governing and set aside actual outstanding issues. Potential government by mid-March 2018!

1. Margin of victory for the party leadership – unclear mood within the SPD

At the SPD party convention, the delegates voted for entering into coalition negotiations with the CDU/CSU, however with a slim majority of only 56.4 %. After an hour-long debate, the party leadership just managed to convince the delegates to vote in favour. If you subtract the 45 votes of the party executive themselves, which unanimously voted in favour of coalition negotiations, you conclude that the majority hinged on only 20 delegates, who could have well decided otherwise. This demonstrates the enormous inner-conflict within the SPD on the question of a repeated government participation.

The party convention was more about the different perspectives regarding the fundamental direction of the party being set by a renewed ‘Great Coalition’, than about political issues. The supporters (among them the complete party executive) argued pro ‘Great Coalition’ on the basis of the exploratory consultations focusing on social and European policy, and with the assumption that re-elections would not be a suitable option. The opponents pointed at the dangers of a renewed ‘Great Coalition’ for the SPD – but also with regard to the strengthening of right-wing populist political forces in Germany.

The resistance against a Great Coalition was not only backed by the youth wing of the SPD – the Young Socialists – with the strong media profile of its leader Kevin Kühnert, but also by the SPD party branch in North Rhine West-phalia, which suffers from heavy defeats in the last year. It was not a conventional dispute between right and left wing within the party as seen during the debate on “Agenda 2010”, but an open confrontation against the party-establishment.

Only the collective strength of the complete leadership of the party and the parliamentary faction across all party wings enabled this margin of victory. However, the whole event shows a considerable loss of authority of the leadership. The renewal of the party being demanded by all sides, independent of a government participation is more an incantation than a concept.

2. Approved paper of the exploratory consultations as base – but further expectations are claimed

The concluding paper of the exploratory consultations has been accepted as base for the coalition agreement. Notwithstanding, there have been further claims brought forward in the resolution of the party convention concerning migration policy, health policy (health insurance) and fixed-term employment contracts, which shall be addressed during the coalition negotiations. These claims are not definitive (for example the SPD idea of a "citizen’s' insurance” is not mentioned anymore), yet the SPD expects some further cooperation by the CDU/CSU.

Nevertheless, found a common ground for coalition negotiations on which the expert working groups can start the consultations. These working groups will now be set-up quickly in order to discuss the details of the agreement in all policy areas. Since distrust of certain groups within the SPD is relatively great, due to various incidents, which occurred since the end of the last ‘Great Coalition’ up to the exploratory consultations, negotiations will be very detailed – thus we can expect a quite extensive coalition agreement. However, because of the fairly far-reaching compromises achieved during the exploratory consultations, the major points of disagreement have been cleared-up. Therefore, it is not likely that the negotiations could escalate at the end. Now is the hour of the experts, they know each other from the last ‘Great Coalition’ and are skilled in achieving results.

3. Schedule

The coalition negotiations have already started, given the increasing public pressure to set-up a government as soon as possible. At the end of the negotiations, the results need to be approved by a SPD members’ referendum, which will take about two weeks, and should not be such as controversial as the party convention. However: the situation is historically new, and the SPD finds itself under great pressure. In case the party members vote in favour, the coalition agreement could be signed, and the government formed by mid-March.


Michael Donnermeyer is a Member of the Board in the Berlin office of CONCILIUS.

Posted on January 22nd, 2018

EXPLORATORY TALKS COME TO AN END WITH DIFFICULTY – FIRST STEPS TOWARDS A GREAT COALITION UNDERTAKEN – NEXT CHALLENGE: THE SOCIAL DEMOCRATS’ PARTY CONGRESS

||The exploratory talks between the Social Democrats (SPD) and the Conservatives (CDU / CSU) were concluded by a joint paper early this morning. The leadership of the parties recommended approve the taking up of formal coalition negotiations on this basis. The next challenge will then be the SPD’s party congress on 21 January. This congress can be in no sense understood as a “no-brainer” because of the continuing rejection within the SPD. This rejection is fueled by general political objection towards a Great Coalition (“GroKo”) as well as strong concerns regarding the today’s final paper.

1. Exploratory talks and extensive support

The 28-page-document contains compromise offers along the lines of nearly all points at issue, which cannot be abolished in coalition talks anymore. Hence, the negotiating parties are facing a very general decision right now: Yes or No to a coalition government? As a result, further controversial discussions will take place during the SPD’s party congress.

The upcoming discussions within the SPD will be most likely determined by the general political question: Is a Great Coalition the right response to the election results? Neither an “unique-selling point”, such as the minimum wage (which has been a key negotiation success of the SPD back in 2013), nor other SPD-relevant topics (citizens’ insurance, change of the top income tax rate, abolition of unfounded cancellation of employees etc.) are right now at stake and could eventually outweigh the rejection to the “GroKo”. It is against this backdrop that the party’s leaders will need to enter the fight about the general political questions, which is to date a tough challenge. Out of the “Political Berlin” (party’s board and parliamentary group), the concerns continue to be major. As an example, the SPD’s strongest regional branch, which is North-Rhine-Westphalia, obstructs the “GroKo”. This could be observed during the past parliamentary group meeting this week.

Insofar the SPD’s upcoming party congress is not a mere formality but a considerable challenge for those in favor of a Great Coalition – to date with a pretty open and unforeseeable outcome. The canvas of the SPD’s members, which would conclude eventual coalition negotiations and approve the “GroKo” such as in 2013, appears to be a more feasible task compared to the party congress.

2. Coalition negotiations from 22 January onwards

In case the SPD’s party congress approves the taking up of coalition negotiations, these would immediately be launched. The 28-page-document from the exploratory talks would be then further refined and ultimately result in the government’s new working program. During that process, experts, coming together from the three parties, will likely be able to establish compromise for all policy areas – also because most of the experts know each other more or less well. The “tough nuts” were already resolved during the exploratory talks. Hence, the actual coalition negotiations should go much more smoothly than the exploratory talks. However, due to the SPD’s lack of trust towards the Conservatives, an eventual coalition treaty is expected to introduce detailed and fixed agenda of future policies. Such as in the past legislative period, the coalition treaty will guide the government’s policy-making. Therefore, negotiating all policy areas carefully is of utmost importance for the coalition negotiations.

3. The Conservatives are in favor of a „GroKo“

For the Conservatives things are already obvious: They want “GroKo” to happen, a minority government or new elections are no options – especially not for Angela Merkel. However, there was also a minority within the Conservatives, being not really convinced about a continuation of a “GroKo” (clearly observable in the CSU, but also by the prime minister of Saxony Kretschmer).

4. Schedule

In case the SPD’s party congress approves the taking up of coalition negotiations, a time span of max. four weeks should be sufficient to finalize the coalition treaty. The canvas of the SPD’s members requires approximately two weeks. Consequently, a new government could be built until mid-March.


Michael Donnermeyer is a Member of the Board in the Berlin office of CONCILIUS.

Posted on January 12th, 2018

Too small to succeed?

||An insight from our funding specialists:

The involvement of SMEs in European projects

Summary: The new EU funding programmes are open to innovative SMEs with a certain size and liquidity reserves allowing them to integrate EU-funded project opportunities successfully into their business strategy. The support of specialists and the creation of clusters are usually required to establish a sound funding strategy.

SMEs in the public discourse

Policy-makers and officials in Brussels traditionally groom European SMEs. In an attempt to copy the successful small business act, which created tens of thousands of jobs in America after the Second World War, the European Commission has created a network of SME envoys, holds round-tables with SME organizations on various topics and supports SMEs’ involvement in European projects and programmes, often with specific slots dedicated to SMEs. On a political level, initiatives to reduce red tape on SMEs, the existence of an intergroup and different spin-offs of political parties focused on SMEs in the European Parliament as well as the representation of SMEs by different social partners and independent associations demonstrate the involvement of SME stakeholders. Since EU funding programmes reflect the political guidelines set in Brussels, SMEs naturally occupy a preponderant position regarding funding policy – this is at least what you would expect. The present article focuses on practical experiences by the authors.

SME definition

The current SME definition is based on the number of employees on the one hand and the balance sheet total or the turnover on the other. To be considered an SME, a company cannot employ more than 250 employees and have a turnover greater than 50 million euros or a balance sheet total of more than 43 million euros. The numerous attempts to discuss the validity of the SME concept have so far stumbled over the highly diverse nature of SMEs. Can you compare a hairdresser with three employees and, say, a turnover of 150.000 euros with a high-tech start-up with millions in seed money or a globally operating producer of specialized packaging material exporting to China, Brazil and Australia? This is not to say that you should not have a European SME policy or cannot target funding programmes at SMEs. The observation is merely that SMEs and small midcaps are so diverse and heterogeneous that it seems appropriate to differentiate and look at specific types of such companies when designing policy and funding initiatives. The authors contend that the funding rules favour innovative SMEs in the field of production and services with a certain size (at least medium-sized companies) to take part in projects successfully. Smaller companies are likely to be successful if they have a more consultative or facilitating role in the project or if they are extremely innovative.

Involvement of SMEs in European programmes and projects

The funding period 2014-2020 brought about long-sought change for SMEs and small midcaps through changes in the research and innovation field, the European Social Fund and regional funding. Through a stronger focus on innovation and larger types of projects SMEs and small midcaps were supposed to be able to integrate opportunities offered by European funding programmes into their business strategy. So far, these opportunities could not always be reaped due to a funding environment that made it hard for SMEs to comply with expectations, the need to get invested in consortia that lasted only a few months in some cases, the financial imbroglio generated by high adaptation costs and the risk to be sapped by larger organizations with a greater ability to dash forward.

In terms of regional funding SMEs and small midcaps should benefit from their local and regional expertise. Most SMEs are indeed rooted in their communities, know the commercial and administrative environment and can therefore more easily adapt to the requirements of the operational programmes. In Horizon 2020 (research and innovation) and the ESF funding scheme SMEs undoubtedly face the challenge to integrate larger projects with fewer partners over longer periods, but once they are in such consortia, they are able to stay in longer, get their staff involved more deeply and efficiently and use the benefits more durably (exploitation).

Note that for Horizon 2020 the Commission points out that the specific “SME instrument is competitive, business-oriented and focused on creating impact, bringing high-potential innovations closer to the market”. This is a general trend in the author’s opinion. SMEs and small midcaps need to be more alert and flexible. It will not be enough to “just be an SME”, the management of such companies needs to adopt a more far-sighted approach, integrating the opportunities offered by EU-funding into their business plan, forming cross-border consortia (research and innovation networks, partnerships with suppliers asf.) before the calls for proposals are published and make investments in this respect – such as attending trainings or hiring experts. Just waiting for funding to come will become increasingly difficult.

Benefits of EU-funded projects

The benefits from participating in EU projects are:

  • Thinking out of the box: develop ideas that would “rot in the drawer” otherwise.
  • Form coalitions with companies, R&I institutes and public authorities across borders, which allow you to find new partners and distribution channels.
  • Get your brand and name known on the EU-level, you will thus increase your chances for further projects.
  • If you do it right, you will have a reasonable upfront investment but later benefit from substantial EU-funding support which, on top of the financial utility for your investment strategy, you can openly advertise as a quality factor.

A recipe for success?

There is no recipe to be successful in applying for European projects. You can have the best of ideas but they might not match what the donor expects. You can develop a great concept and an excellent proposal but lack the appropriate partners. That said, you can strongly increase your chances by following the ensuing recommendations:

  • Make EU-funding opportunities an essential part of your business plan. Therefore, look out early for programmes that could suit your business idea and keep updated on the calls for proposals, which are being published regularly.
  • Form clusters with all kinds of partners that suit your concept. Be not afraid of trust issued. In the early stages you will not to have to disclose confidential information. If you wish to take a more straightforward route, you can create more formalized partnerships.
  • Keep being innovative. The upcoming EU-funding opportunities will benefit innovative SMEs and midcaps looking beyond their everyday business.
  • Have some cash at hand. EU-projects are no subsidies in the classic sense. You need to develop a suitable project plan and implement it, this requires commitment and upfront investments, there is no cow to be milked, disregard these fairy tales.
  • Look for professional support early on. Do not take chances, have your opportunities and ideas checked by experienced and seasoned experts and get support for writing the project proposals if you have little experience or if your daily business does not allow you to dedicate enough time. You will thereby avoid formal mistakes (which cause disqualification) and have professionals write your proposal. This allows you to focus on your idea and delegate the formal and writing part to experts.

Small is beautiful but when it comes to EU-projects being small is not enough. Increase your chances by joining forces and get that funding for your ideas.

Our team of funding specialists is happy to advise you without obligation. Please contact Alisa Gühlstorf for further information: guehlstorf@concilius.com.


Alisa Gühlstorf and Frederic Maas are part of our team of funding specialists in Brussels.

Posted on January 9th, 2018

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