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Coalition concerns

Tuesday 13 July 2010 - by Oliver Parry and Andrew Hickley

Are coalition governments more or less effective at tackling financial reform?

The formation of the UK’s coalition Government now brings the number of coalitions in the European Union to 18 out of the 27 member states.
Others include Austria, Czech Republic, Denmark, Finland, Germany, Italy, Latvia, Luxembourg, Poland, Slovakia and Sweden.

But what impact, if any, do coalition governments have on the formation and passing of financial legislation, particularly on the EU stage?

Coalitions could be said to add an extra layer of complexity to the already long-winded negotiations between member states to reach consensus on such issues.

Germany’s Chancellor Angela Merkel has struggled to walk the line between keeping the voters and her coalition partners happy, while also achieving consensus on key financial reforms with Europe.


Germany’s recent ban on naked short-selling and its reluctance to bail out Greece are two examples of Merkel bowing to pressure from both her coalition partners and voters. However, this did not stop Merkel’s party – The Christian Democrats - from losing the party’s majority in the Bundestag at the May elections. Merkel’s party is now unable to pass any legislation without the support of her coalition partners.

European Centre for International Political Economy director Fredrik Erixon says: “I know that there are some tensions inside the German coalition, between the Social Democratic Party and the Christian Democratic Union, especially over derivates, and how far regulation should go.”

London School of Economics European Institute Professorial research fellow Iain Begg says there is also a great deal of tension in the UK Conservative-Liberal Democrat coalition, particularly between the far left LibDem players such as Business Secretary Vince Cable and the Treasury, and he says the UK coalition must “show a united front”.

But he believes: “British national interests will always prevail once the red lines are drawn. It doesn’t matter what form of government is in power, they will always support the city.”


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