Merkel’s Coalition Splits Over Push for Interventionist State

The prospect of bailing out more companies battered by the coronavirus pandemic is opening up a split in the German government, with free marketeers resisting a push for increased state intervention, according to people familiar with the matter.

Chancellor Angela Merkel’s government in recent weeks has signaled it would help travel operatorTUI AG and steelmakerThyssenkrupp AG overcome a collapse in revenues. As the companies enter talks for multibillion-euro bailouts from the government rescue fund, the coalition is divided over how much power the state should take when it hands over taxpayer cash, the people said.

The junior party in Merkel’s coalition, the center-left SPD, wants to reprise the model for the 9 billion-euro ($10.6 billion) bailout ofDeutsche Lufthansa AG in which Berlin secured voting rights and two supervisory board seats. Conservatives in Merkel’s Christian Democratic Union are resisting, and want a so-called silent holding that would limit state interference, the people said.

“Those who pay, need to have a say,” SPD lawmaker Andreas Schwarz, a member of the committee overseeing the rescue fund, said in a phone interview.

The ideological clash shows how coronavirus has ended decades of light-touch government in Europe’s economic powerhouse. The outcome could signal a more assertive state presence in German industry for years to come.

Read More: Merkel Is Seizing Her Chance to Revolutionize Germany’s Economy

The Lufthansa rescue made the German government the biggest shareholder in the country’s flagship carrier, thrusting the state back into the heart of a company it privatized with fanfare more than 20 years ago.

The latest dispute comes as TUI and Thyssenkrupp enter talks for government bailouts. TUI is expected to seek 1 billion to 2 billion euros after coronavirus upended the global travel market, while Thyssenkrupp is likely to seek a similar amount for its ailing steel division, people familiar with the matter said previously. Thyssenkrupp is also applying for extra money from a German government fund established to decarbonize heavy industry via hydrogen.

The prospect of keeping steel production in Germany, where it can more easily oversee the shift to a manufacturing process with lower carbon emissions, adds an extra incentive for the government.

No More Loans

Already heavily indebted, the companies won’t receive government loans like Adidas AG, which has paid back its debt, or shipbuilder MV Werften, a victim of the collapse in sea cruises, and will instead discuss capital injections with officials from the rescue fund.

In Thyssenkrupp’s case, Economy Minister Peter Altmaier would prefer a silent participation that would inject capital without giving government voting rights or seats on the supervisory board, people familiar with the matter said.

Opposing Altmaier, Germany’s finance ministry led by the SPD’s Olaf Scholz would like an active stake that would give politicians voting rights at the company. Mindful of public anger at taxpayer losses incurred in banking bailouts following the 2008 crisis, the SPD wants control to prevent a repeat.

Read More: Thyssenkrupp in Talks for Over 5 Billion Euros in Steel Aid

Allied with the SPD, Thyssenkrupp’s labor unions would like to see the government take an active stake, potentially limiting management’s ability to slash jobs and close units.

“The present situation shows how urgently necessary it is that the state takes a stake in Thyssenkrupp’s steel unit,” union official Knut Giesler said Tuesday after a potential buyer for its heavy plate steel mill, a maker of metals for use in construction, withdrew from talks.

Fighting for survival after a collapse in international travel, TUI Chief Executive Officer Friedrich Joussen told Germany’s Spiegel magazine it couldn’t rule out the government taking a stake even as it looked to raise up to 1 billion euros in a new capital from investors.

TUI, with 3 billion euros in loans, has received Germany’s second-biggest corona bailout so far, topped only by Lufthansa. Adding more debt could put the company at risk of breaching its covenants when a waiver of the debt limit rules expires in 10 months from now.

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