Institutions and coalition formation: The German election of 2005

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Abstract
The German election of 2005 creates three puzzles for the literature on coalition formation. First, the election led to a rare event in German politics and in parliamentary systems more generally, a ‘grand coalition’ between the two largest parties. Second, a minority government, something which has never occurred in postwar Germany (except briefly as the result of the breakdown of a government coalition), was in fact one of the two most likely governments to form. Third, the parties of the left retained a comfortable majority in the Bundestag; however they did not form a coalition. The election of 2005 appears unique in German politics, but we argue that its outcome is easily understood using existing institutional theories of coalition formation. We examine party positions in two dimensions (economic and social) using computer-based word scoring of party manifestos. We demonstrate that the conditions for a SPD minority government were present in Germany due to its central location in the policy space. While the configuration of policy positions would thus have allowed the SPD to form a minority government, the role of the Federal President as a veto player could have prevented it from forming, and the presence of an opposition-controlled upper house would have decreased its effectiveness. The mere possibility of forming a minority government gave the SPD a bargaining advantage in the coalition negotiations with the CDU/CSU. We show that in the final portfolio allocation, the SPD received ministries which control approximately two-thirds of the federal budget.

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