The Dismantling of Angela Merkel: The blow-by-blow of what happened.

• Author: Engelen, Klaus C.

When we last looked at how Germany is responding to the ambitious reform plans of French President Emmanuel Macron and EU President Jean-Claude Juncker to deepen and strengthen the eurozone and the European Union, things appeared very different.

To make room for difficult negotiations on the intended "Jamaica" coalition--named after the colors of the Caribbean nation's flag--with Christian Democrats and their Bavarian sister party, the Christian Social Union, the liberal Free Democrats (FDP), and the Greens--Wolfgang Schauble had to give up the finance ministry, which he had occupied for eight turbulent years as the dominant policymaker of the Eurogroup.

Schauble was moved to the prestigious presidency of the German Bundestag. He left as his legacy as finance minister a "non-paper" for euro-zone reform calling for "no bailouts, no transfers, automatic debt restructuring, and more bail-ins."

In his position paper, Schauble argued that for any eurozone reform, three principles would be indispensable. First, fiscal responsibilities and control must be kept together, thereby avoiding moral hazard. Second, better instruments are needed to foster the implementation of structural reforms. And third, credible stabilization functions are needed to deal with global or domestic shocks. Finally, any upgrading of the European Stability Mechanism into a European Monetary Fund would need to be done on an inter-governmental legal basis to make sure that the fiscal controls of member country parliaments such as the Bundestag would be preserved. Schauble's warning not to base a future European Monetary Fund on EU Community law was loud and clear.

Since the FDP under their assertive leader Christian Lindner had campaigned on a strong Euroskeptic platform, promising that "with the FDP, a money pipeline out of Germany into other EU states will not happen," there was the prospect that the FDP could get Berlin's finance ministry in a new Jamaica coalition government under Chancellor Merkel, and protect Schauble's legacy in coming battles on eurozone reform.

BUT THE JAMAICA TALKS COLLAPSED

In November 2017, after a month of exploratory talks, Merkel's CDU, the Bavarian CSU, the pro-business FDP, and the Greens were supposedly close to a historic agreement to form a new coalition government, dubbed "Merkel IV." As was to be expected, the FDP did not get far with radical proposals such as putting an end to the European Stability Mechanism as the euro backstop fund, or giving eurozone member states the right to temporarily exit the common currency zone should they run into economic difficulties.

Shortly before midnight, the FDP's Lindner appeared before the press and in a stunning announcement declared that the four partners had not found a common vision for modernization of the country or common trust to resolve differences on migration, taxes, and energy policy. Lindner's Jamaica farewell message left the other partners shattered. "It is better not to govern than to govern badly," Lindner said.

After the collapse of the Jamaica coalition talks, Merkel faced the prospect of forming a minority government or preparing for new elections. She rejected a minority government because this would expose her to unforeseen instabilities. If it came to new elections, the party could find someone to replace her.

Therefore, forming a third grand coalition, or "GroKo," would be her safest bet. But the Social Democrats, under new leader Martin Schulz, had categorically ruled out the option of entering another coalition under Merkel.

In January 2017, Sigmar Gabriel, then-SPD leader and minister of the economy, had proposed Schulz, the former president of the European Parliament, as the new SPD leader and candidate for the upcoming national elections in September.

In March 2017, in a surge of major opinion polls for Germany's oldest party--founded in May 1863--the SPD delegates to a special party congress supported Schulz with 100 percent of the votes to be...