The highs and lows of Germany's awkward 'grand coalition'

23rd September 2009, Comments 0 comments

Germany's "grand coalition," which has governed Europe's top economy and most populous country for the past four years, has been less of a love affair than a shotgun marriage.

Forced into an unusual alliance by an inconclusive election in 2005, the conservative Christian Democrats and the centre-left Social Democrats have nevertheless chalked up some achievements during their awkward partnership.

The following are the coalition's highs and lows over the past four years.


Tax: Managed to push through Germany's largest-ever postwar tax increase, hiking Value Added Tax (VAT) by three percentage points to 19 percent in a bid to fill a gaping hole in public finances.

Jobs: Drove down unemployment by more than one million, but threatens to rise significantly after the election as a result of the financial crisis.

Crisis: Pushed through around 80 billion euros (118 billion dollars) in two stimulus packages to kick-start the economy in the wake of the financial market crisis, as well as a 500-billion-euro fund for ailing banks.

Germany was however criticised for what was perceived as too slow a response to the crisis.

Families: Improved family leave policy and, for the first time, offered incentives for men to take time off to raise their children. The benefits, while widely praised, have not as yet boosted Germany's low birthrate.

Pensions: Raised the pension age to 67 from 65 in a bid to offset some of the costs of the country's rapidly greying population. The changes will be gradually phased in from 2012.

Environment: Brokered a deal committing to reduce CO2 emissions by 40 percent by 2020, via emissions-trading schemes as well as improving energy efficiency, particularly in buildings.


Public finances: Aimed for a balanced budget by 2010 but this target was blown to smithereens by the financial crisis that shattered tax income and pushed spending through the roof.

Instead of a balanced budget, Germany's deficit is expected next year to be a record six percent of gross domestic product, twice the maximum allowed by European rules.

Health: Largely seen as the grand coalition's greatest failure. Haggled furiously over health reform in a debate that nearly split the fragile alliance in two and pushed popularity ratings to six-year lows.

In the end, agreed a messy compromise that commentators said failed to address the system's deep-seated problems.

Wage policy: Argued bitterly over wage policy, with the Social Democrats pushing for an across-the-board minimum wage. Again, a compromise was found, encouraging negotiations on minimum wages for some sectors of the economy.

Economy: Mainly because of its heavy dependence on exports, Germany was harder hit than most by the financial market crisis and output is expected to contract by an eye-watering five to six percent this year. However, the economy did come out of recession in the second quarter of the year, earlier than expected.


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