Cablegate: Merkel Vs. Steinmeier? What Do the German

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C O N F I D E N T I A L SECTION 01 OF 06 BERLIN 001176

NOFORN
SIPDIS

STATE FOR EUR/CE, INR (KEETON)
TREASURY FOR ICN (KOHLER)
NSC FOR JEFF HOVENIER

E.O. 12958: DECL: 09/22/2019
TAGS: ECON EFIN EINV ENRG ETRD GM KJUS PGOV PREL
PTER, SENV
SUBJECT: MERKEL VS. STEINMEIER? WHAT DO THE GERMAN
ELECTIONS REALLY MEAN FOR U.S. INTERESTS?

REF: A. BERLIN 32
B. BERLIN 1002
C. BERLIN 1136
D. BERLIN 1138
E. BERLIN 1162

Classified By: MINISTER COUNSELOR FOR POLITICAL AFFAIRS GEORGE GLASS FO
R REASONS 1.4 (B) and (D)

SUMMARY
-------

1. (C/NF) This is not a "change" election. The German public
does not see the September 27 parliamentary elections as
decisive, and on many foreign policy fronts, including
Afghanistan, arms control, and Russia, we do not foresee
significant or distinct policy differences between the two
most feasible coalition options. The most likely results of
the elections are a CDU/CSU-FDP (black-yellow) coalition or a
continued CDU/CSU-SPD Grand Coalition. However, in some
areas there may be changes, including on Iran, tax policy,
and nuclear energy. More importantly, there may be a new
foreign minister who will likely need to get up to speed
quickly on such crucial issues as Iran, Afghanistan, and
NATO's strategic posture. Leaders from the CDU/CSU and FDP
promise a government more friendly toward the United States.
The near certainty that Angela Merkel will remain chancellor
argues for this, but the unpredictability of Foreign
Minister-aspirant and FDP Chairman Guido Westerwelle may call
for focused diplomatic engagement with the new FDP political
actors (see REFTEL E for Post's comprehensive expose of
Westerwelle). END SUMMARY.

BLACK-YELLOW (CDU/CSU-FDP)?
---------------------------

2. (C/NF) It is virtually certain that Angela Merkel will
retain her position as Chancellor after this Sunday's
elections. But it is impossible to predict the final
composition of the next coalition given that about a third of
the electorate is still undecided and the polls show only a
narrow parliamentary majority for black-yellow. Chancellor
Merkel has repeatedly voiced her preference for a
black-yellow coalition and has promised to form one even with
a one-vote parliamentary majority. The FDP's Westerwelle has
echoed this sentiment as its first choice as well.

3. (C/NF) The SPD has almost no prospect of leading a
government and is only likely to remain in power as a
weakened junior partner in another Grand Coalition, should
the CDU/CSU-FDP come up short of a parliamentary majority.
The SPD has failed to gain much momentum, although it has
more recently risen a couple of points in the polls. It
continues to suffer from an inability to profile itself
against the CDU (or even a lack of desire to break with the
CDU in any significant way), with which it has been in
government for the past four years. Also unhelpful have been
a string of losses in local, state, and the June European
Parliament elections.

4. (C/NF) U.S. interests will not only be affected by the
composition of the next coalition but also which parties are
in the opposition. A CDU/CSU-FDP coalition would bring to
power a new set of top players at the Ministry of Foreign
Affairs, Justice, Environment, and at either Economics or
Finance (as well as probably at least one other FDP-led
ministry with some turnover in CDU/CSU ministries as well).
The extent to which policy will change is less obvious,
however, because FDP Chairman and Foreign Minister aspirant
Guido Westerwelle has promised considerable continuity with
Steinmeier's approach to foreign policy. In addition, the
FDP's economic reform goals will face considerable resistance
from the Bavarian CSU as well as parts of the CDU. The lack
of coordination and consistency, including between the
Chancellery and MFA, that often occurs in German policy
making will continue to be a challenge for the United States.

5. (C/NF) A black-yellow coalition will face a more united
opposition led by an SPD that is likely to move left if it
leaves government and seeks to profile itself against the
Greens and the Left Party, based on the profiles of SPD
leaders waiting in the wings for Steinmeier and SPD Chairman

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Franz Muentefering to leave. German governments can operate
with narrow majorities due to strict party discipline (which
gets stricter the narrower the majority), but Merkel has not
shown much courage in using her considerable personal
popularity to push through policies that lack public support.
On Afghanistan, in particular, a black-yellow coalition may
seek to simply roll over the ISAF mandate unchanged when it
comes up for renewal in December, rather than risk a row in
the Bundestag over an increase in the troop ceiling, which
the Defense Ministry has concluded is necessary to deal with
the growing insurgency in the German north.

OR GRAND COALITION (CDU/CSU-SPD)?
---------------------------------

6. (C/NF) However, another Grand Coalition cannot be
discounted, even though nobody professes to want it. It is a
historical fact that the center-right parties have not won a
parliamentary majority since 1994. Another Grand Coalition
would almost certainly be even more difficult for the CDU/CSU
and the SPD than the current one since both parties would be
eyeing each other with distrust and the expectation that the
government may not last an entire term. Further, Merkel's
position within her party would be weakened by what would be
viewed as her failure to achieve a coalition with the FDP
while the Free Democrats would continue to take advantage of
conservative dissatisfaction with the Grand Coalition's
disgruntled CDU voters.

7. (C/NF) The SPD leadership might be secretly relieved not
to lose their government posts, but its continued partnership
with the CDU/CSU would likely cause further bleeding of the
party's more leftist supporters to the Greens and Left Party,
further weakening its base. In addition, the SPD left-right
split might be exacerbated, with leftists tempted to
prematurely rupture the Grand Coalition to build a majority
red-red-green government where the SPD would hold the
chancellorship. CDU officials certainly believe -- and have
told the Embassy -- that they expect the SPD would seek to
replace a Grand Coalition with a red-red-green one some time
during the term. Even though Steinmeier has insisted that
any coalition agreement would be for the entire legislative
period, the distrust between the parties would remain. Plus,
if the SPD performs badly in the election, Steinmeier
literally may no longer be in a position to keep his word.

GERMANY'S NEXT FOREIGN MINISTER - WESTERWELLE OR STEINMEIER?
--------------------------------------------- ---------------

8. (C/NF) The election's most obvious impact on bilateral
relations will be in terms of a potential change in foreign
ministers. Our extensive experience with Steinmeier allows
us to comfortably predict how a Steinmeier-led MFA would
pursue German interests globally, and vis-a-vis the United
States. On the other hand, Westerwelle continues to remain
an enigma who has been unable to establish himself as a
significant voice on foreign affairs. The FDP's foreign
policy spokesman Werner Hoyer -- a well known foreign policy
analyst in Germany and internationally, including in the
United States -- has taken the lead here. When we asked
Hoyer this week what would change with Westerwelle, he
struggled to say anything. Westerwelle is a domestic
political animal with little appetite for foreign policy and
international affairs. He will, therefore, continue to be
dependent for foreign policy advice on his mentor, former
Foreign Minister Hans-Dietrich Genscher as well as on Hoyer
and whichever Ministry diplomats gain his trust (REFTEL E).

9. (C/NF) Westerwelle's attempt to position himself among
Germany's foreign policy elite with a speech in May at the
German Foreign Relations Council (DGAP) did not produce the
intended results and instead revealed his limitations on such
major issues as Middle East peace. If Westerwelle becomes
Germany's next foreign minister, his learning curve will be
steep. Germany's small foreign and security policy elite --
already skeptical of Westerwelle -- will resent his rise into
the second most powerful political office of the land. And
we will be faced with the question of how best to approach
someone who has clearly had a mixed relationship with the
United States. Despite Westerwelle's praise and respect for
the current Obama Administration, we should not forget that,
as part of the opposition, he has criticized the United
States for the last eight years, while at the same time

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offering very few ideas of his own on how to solve
international problems (see REFTEL E).

10. (C/NF) If Steinmeier is able to lead the SPD to a strong
enough showing to force a Grand Coalition, he certainly could
maintain his position as Foreign Minister. He would also
have the increased political clout provided by a mandate in
the Bundestag and his success in blocking a CDU/CSU-FDP
coalition. Obviously, there would be a high degree of
foreign policy continuity. Unlike Westerwelle, Steinmeier is
already on board with both sides of the U.S. approach to
Iran, and he has told the Ambassador that he supports
additional sanctions should Tehran fail to respond to U.S.
overtures. However, competition between Steinmeier and
Merkel over control of foreign policy will not end with the
election, and Steinmeier would likely try to focus on a few
key issues where he could differentiate himself and his party
from Merkel and the CDU, with arms control, Afghanistan, and
Russian relations being likely choices. Steinmeier wants to
work closely with Washington on these issues and is less
likely to surprise Washington than the Chancellery would be.

11. (C/NF) The goodwill that marked the first year of the
Grand Coalition is unlikely to be repeated in a second term,
particularly as Steinmeier contends with those in his own
party who would prefer a leftist coalition. If there is not
enough support for a CDU/CSU-FDP coalition, then there would
likely be a numerical red-red-green majority in the
Bundestag. The strained communication that currently marks
Chancellery-MFA relations is likely to continue. Both
Steinmeier and Merkel are responsible realists, however, who
understand the need to work together on the big issues, as
was evident during the Russian invasion of Georgia, their
approach to the Middle East, and their reaction to the
international financial melt down. If new crises arise, the
two are likely to continue to put their own interests aside
long enough to speak with a single voice.

FOREIGN POLICY ISSUES IN BLACK-YELLOW AND GRAND COALITIONS
--------------------------------------------- -------------

12. (C/NF) AFGHANISTAN (Some Change): Westerwelle is one of
the few German politicians who justifies the Afghanistan
deployment on the basis of "German national security
interests" and the FDP as a whole has been a consistent
supporter of the ISAF mandate. But with only a narrow
majority in the Bundestag and facing an SPD opposition ready
to accuse them of militarizing the German mission, a
CDU-CSU/FDP coalition ironically might be less willing (and
able) to push through necessary troop increases than a Grand
Coalition. On the other hand, there is likely to be no
difference between the two on the support for police
training, economic assistance and other civilian aid.

13. (SBU) ARMS CONTROL/NONPROLIFERATION (Little change):
Westerwelle proudly says that the motto of the MFA under his
leadership will be "peace through disarmament," thereby
seeking to be even more pro-arms control than Steinmeier.
Although Westerwelle has called for the removal of all U.S.
tactical nuclear weapons from German soil by 2013, it is
questionable whether he will manage to include this in a
coalition agreement with the CDU/CSU given their likely
resistance.

14. (C/NF) RUSSIA (No change): Like the SPD, the FDP sees
Russia as a "strategic partner" in addressing issues such as
Iran, energy, and Afghanistan and believes engagement and
assistance with modernization is the best way to address
Russia's democratic deficits. Like Merkel and Steinmeier,
Westerwelle has pursued close ties to Russian leaders,
including Foreign Minister Lavrov and Defense Minister
Ivanov, both of whom gave him high-profile meetings in Moscow
this past spring.

15. (C/NF) IRAN (Some change): Steinmeier has been a steady
supporter of US policy toward Iran -- both in terms of
dialogue and the need for increased sanctions if necessary,
while Westerwelle has spoken almost exclusively about the
need for dialogue. In addition, Westerwelle's FDP's
pro-business orientation makes it particularly skeptical of
sanctions and is also resistant to unilateral efforts to cut
back trade. Merkel will likely have to take a stronger role
in this issue to keep Germany's position from falling back to

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the least common denominator.

16. (C/NF) TURKEY (Some change): A black-yellow coalition
may result in a subtle, less favorable, shift in Germany's
policy towards Turkey with the exit of the SPD -- Turkey's
staunchest supporter -- from the government. Although FDP
foreign policy experts recognize that EU membership is an
important factor in encouraging additional domestic reforms
in Turkey, it has kept an open mind on the issue. However,
the FDP is more vocal than the SPD in its criticism of
Turkey.

17. (C/NF) MIDDLE EAST (Little change): Westerwelle's views
on Israel and Middle East peace may stem more from his past
experience in addressing criticism against Israel and his
interpretation of Germany's historical role toward Israel
than from his own Middle East policy or strategic
calculations. Some attribute Westerwelle's current
pro-Israel stance as the result of his having been burned
politically both domestically and in Israel in 2002. At that
time, Westerwelle defended an FDP politician, Juergen
Moellemann, who had published a brochure strongly critical of
then Israeli Prime Minister Ariel Sharon's actions towards
the Palestinians. Some claimed the brochure was
anti-Semitic. While in Israel shortly thereafter,
Westerwelle was questioned by then-PM Sharon about what
Sharon referred to as a growing anti-Semitism in Germany and
Europe. In an August 2009 interview with "Der Spiegel,"
Westerwelle explained his decision to vote against Germany's
participation in UNIFIL with his view that Germany cannot
take a neutral position in the Middle East because of its
past. He noted that he had visited the Golan Heights in
Israel as a young man and was impressed with the
vulnerability of the country. Even more so than Steinmeier,
however, Westerwelle may seek a greater role for Germany and
the EU in the Middle East. In the "Spiegel" interview, he
called for the EU to launch an initiative to establish a
conference for security and cooperation in the Middle East.
We could expect both Steinmeier and Westerwelle to hold to
U.S. messages on the Middle East, with both competing with
the Chancellery for the lead on this issue.

18. (C/NF) GUANTANAMO (No change): Steinmeier would likely
take a more accommodating approach toward Germany accepting
some of the Guantanamo detainees than would Westerwelle, but
the key ministry in deciding this issue will continue to be
Interior. In either a black-yellow or another Grand
Coalition, Wolfgang Schaeuble (CDU) could continue on as
Interior Minister, although there is some talk of his being
named as EU commissioner. Schaeuble has been very skeptical
of accepting detainees from a security standpoint. More
recently, he told the Ambassador that Germany would only take
detainees who will require no surveillance.

19. (SBU) ECONOMIC CRISIS/INTERNATIONAL FINANCIAL REGULATION
(Little Change): All potential government parties share a
similar strategy; increase regulation and supervision of the
financial sector with differences at the margin. The SPD
advocates taxing share trades over 1000 euros and monitoring
private equity funds more closely, while the CDU/CSU and FDP
propose concentrating financial supervision under the
Bundesbank. A black-yellow government would result in a new
Finance Minister; if Karl Theodor zu Guttenberg remains at
the Economics Ministry, then the FDP might be given the
Finance Minister, with Hans-Otto Solms, an experienced and
cautious financial policy expert, the most likely replacement.

20. (C) CLIMATE CHANGE (No Change): There is little
difference between the parties on issues in play at the
upcoming UNFCCC's COP-15 in Copenhagen, and Merkel maintains
strong control over German policy in this area. There will
be a new Environment Minister should a black-yellow
government be formed, however, and it is unclear which party
would then control the Ministry. In previous CDU/CSU-FDP
coalitions, the CDU ran it but if the FDP does as well as
current polls suggest, it might make a play for the Ministry.
Current SPD Environment Minister Sigmar Gabriel has had a
high profile in his party's Bundestag campaign and could
remain in place in a Grand Coalition.

21. (C) ENERGY (Some Change): The SPD insisted on
continuation of the previous government's plan to phase out
nuclear power plants during the last coalition negotiations

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and would stick to this position again. In contrast, the FDP
has been the party most open to nuclear energy, insisting
that the phase-out itself should be at least slowed down to
protect Germany's supply of energy. The CSU/CSU also wants
to extend the possible life of existing nuclear power plants,
provided they are safe, during a "transitional" period to
provide time for Germany to switch to greater reliance on
renewable sources. Recent controversies over the safety of
some nuclear power plants have made Merkel and even the FDP
less willing to press for reliance on nuclear energy.

22. (C/NF) DATA PROTECTION (Little Change): Data privacy has
been a second-tier campaign issue but does arise in debates
on domestic security policy. Another Grand Coalition could
leave Justice Minister Brigitte Zypries (SPD) in place; she
reluctantly agreed to the landmark data sharing initiative on
serious crime and terrorism suspects (the Pruem-like
agreement) due to privacy concerns. A CDU/CSU-FDP coalition
might return Sabine Leutheusser-Scharrenberger to the Justice
Ministry, which she headed from 1992-96 in the last
black-yellow coalition (she resigned her office after the her
party agreed to wiretapping legislation proposed by the
CDU/CSU). She or any FDP Justice Minister would likely
continue to see their role as the protector of civil
liberties and therefore they would carefully scrutinize all
bilateral and U.S.-EU data sharing initiatives.

23. (C/NF) COUNTER-TERRORISM/LAW ENFORCEMENT (Little change):
The CDU will likely remain in control of the Interior
Ministry regardless of the coalition, and Schaeuble, although
67, is likely but not certain to stay on for another term.
He has brought U.S.-German CT cooperation to an unprecedented
level, and no other German official has offered as much
cooperation (except on the issue of resettling Guantanamo
detainees where the focus on internal German security
supersedes his desire to work with Washington). Any possible
replacement -- Chancellery Chief Thomas de Maiziere has been
mentioned in the press -- is unlikely to have his authority
or expertise but will likely continue his policies.

24. (U) TRADE (No change): All five parties are committed to
open market but the SPD, Greens, and The Left Party want
environmental and social standards included while the CDU/CSU
stresses the need for protection of intellectual property and
the FDP worries about domestic subsidies and market access.
None of the parties wants to restructure the German economy
to reduce export-dependency and address global imbalances.
Other U.S. interests, such as concluding the Doha round of
trade negotiations, would not likely be affected by a change
in coalition.

25. (U) TAX POLICY (Some change): Tax policy is often cited
as the area where a black-yellow government would produce
change. The FDP proposes a radical overhaul of the tax
system to simplify the tax code and stagger the corporate
rate. CSU leader and Bavaria Minister-President Horst
Seehofer has been critical of the FDP plan, which he says
will run up the deficit and impose an excessive burden on the
public budget. Neither the CDU/CSU's nor FDP's tax proposals
are realistic, however, in light of budget deficits that are
expected to be more than 2 percent this year and 4 percent in
2010, just as mid-term targets for Germany's balanced budget
amendment kick in. Some sort of tax increase therefore is a
near certainty, perhaps in the form of an increase in the
value-added tax.

COMMENT
-------

26. (C/NF) Chancellor Merkel will continue to exert strong
influence on German foreign policy in an attempt to create a
political legacy in international affairs. This will be true
whether the MFA is led by Steinmeier or Westerwelle. We can
also predict that tensions between the Chancellery and MFA
will remain based on different coalition partners controlling
them. If Steinmeier returns to office, he will be a reliable
partner. Westerwelle is a wild card; his exuberant
personality does not lend itself to taking a back seat to
Chancellor Merkel on any issue. If he becomes foreign
minister, there is the possibility of higher profile discord
between the Chancellery and MFA. This may demand focused
diplomatic engagement by the USG with the new FDP political
actors. END COMMENT.

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Murphy

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