New German coalition closes in on common programme

24th October 2009, Comments 0 comments

Almost a month after Merkel won a second term, her conservative Christian Democrats and her new partners have agreed the basic outlines of policy on a range of issues.

Berlin -- Chancellor Angela Merkel's new coalition haggled on Friday over how to cut taxes and shore up Germany's tattered public finances in a final push to finalise a common programme this weekend.

Almost a month after Merkel won a second term, her conservative Christian Democrats (CDU/CSU) and her new partners, the pro-business Free Democrats (FDP), have agreed the basic outlines of policy on a range of issues.

These include effectively scrapping the 2000 decision to abandon nuclear power by around 2020, by extending the life of some reactors, as well as reforms to the health care system and increased spending on education.

In foreign policy, they want to press for the Afghan government to take on more responsibilities so that Germany's 4,200 troops can come home, and to leave the door open to Turkey joining the European Union.

But they have saved the thorniest issue to last: how to marry both parties' electoral promises of tax cuts with the harsh reality that Germany, Europe's largest economy, is broke.

With the global recession pushing export-dependent Germany into its worst slowdown since World War II, the government is on course to spend 50 billion euros (75 billion dollars) more than it takes in this year.

It already spends tens of billions in interest payments on its debts each year, and will be forced to borrow hundreds of billions of euros (dollars) more over the next few years, putting it in breach of EU deficit rules.

Once a pillar of fiscal responsibility in Europe, Germany's national debt now stands at around 1.5 trillion euros, or around 20,000 euros per citizen.

The neo-liberal FDP, led by Guido Westerwelle, promised in its election campaign 35 billion euros worth of tax cuts and to take the axe to government spending.

But Merkel promised lighter tax cuts of 15 billion euros, and is wary of stoking protests from Germany's powerful unions.

Earlier this week it appeared as though the parties had found a way out of the impasse by proposing a special fund not part of the federal budget to cover 40 billion euros worth of social security spending over the next four years.

This would have given the new government a clean sheet next year and would have allowed it to circumvent a constitutional amendment imposed by Merkel earlier this year aimed at gradually clawing Germany back in the black.

But the parties were forced to go back to the drawing board, admitting on Thursday, after howls of protest from commentators slamming the idea as dishonest trickery, that it would be unconstitutional.

"Evidently the FDP and CDU/CSU have realised in time that it is better not to establish the new government on the basis of lies and deception," the conservative Frankfurter Allgemeine daily said in a Friday editorial.

Merkel, the most powerful woman on the planet in the eyes of Forbes magazine, is due to be re-elected chancellor by parliament on Wednesday.

But beyond that, it remains unclear how the various ministries will be shared between the three parties, the FDP, the CDU and its Bavarian sister party, the CSU.

In previous coalitions like this, the head of the FDP has taken the post of foreign minister, and Westerwelle is likely to maintain the tradition.

The post of finance minister is seen as key. Once that is filled, the other jobs then fall into place.

Sources said on Friday that the CDU's Wolfgang Schaeuble, currently interior minister and a former close ally of ex-chancellor Helmut Kohl, would take that job.

Reports said that the CSU's popular Karl-Theodor zu Guttenberg would move from the economy ministry to defence, and that Thomas de Maiziere, CDU, Merkel's trusted lieutenant as her chief of staff, would be interior minister.

Simon Sturdee/AFP/Expatica

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