German Ministers Mutiny As Merkel Struggles To Preserve Ruling Coalition

Shortly after German Finance Minister Olaf Scholz released his plan to complete the European Banking Union via the Financial Times, several reports surfaced claiming that Scholz had inexplicably neglected to inform Chancellor Merkel about the plan, testing Merkel's political authority as she struggles to finish out the rest of what's set to be her final term.

As it turns out, snubs like this one are becoming increasingly common as Merkel appears to have lost control over her government. Two weeks ago, Defense Minister Annegret Kamp-Karrenbauer proposed a peace plan for Northern Syria without clearing it with the chancellor. Though at least during that incident, Merkel was given a heads up about the plan. AKK's ideas were pilloried by the Social Democrats and Foreign Minister Heiko Maas, and the whole incident ended up embarrassing the government as it seeks to combat speculation that it's asleep at the wheel. 

Both Scholz and AKK are potential contenders to succeed Merkel, but with the resurgent Alternative for Germany party boasting solid gains in recent elections, it's difficult to imagine how things might go in 2021.

Angel Merkel

Both Merkel's Christian Democrats and their coalition partners (including the SPD) have suffered in the polls as Merkel's coalition limps on. Fears of an early election have made it impossible for the newcomers to break with Merkel. In fact, even after releasing his plan, Scholz met Merkel in the Chancellory in Berlin in what was described as a show of unity, according to Bloomberg.

Much of the dysfunction in the German government seems to stem from broken bonds of loyalty. AKK was once Merkel's anointed successor, but a political disagreement has triggered a revolt against her. As a result, her relationship with Merkel has become strained.

Scholz, on the other hand, is trying to win a contest for the leadership of the SPD. His rivals have warned they could pull out of the governing coalition and trigger snap elections.

But instead of boasting the air of revolution, Berlin feels adrift, Bloomberg said. Merkel's power has waned, but none of the contenders to succeed her have stepped up.

Though Scholz's plan for finishing the European banking union framework received a chilly reception in the Bundestag finance committee, he stands by the plan, and insisted that Merkel's party will at least stand behind the principles for a deposit insurance scheme (the most controversial component of Scholz's plan) set out by Scholz's predecessor, Wolfgang Schaeuble.

Because, as we explained yesterday, Deutsche Bank is going to need the support.