COALITION STANDSTILL

Pursuing their own Politics

German Chancellor Angela Merkel and Bavarian state premier and leader of the Christian Social Union (CSU) Horst Seehofer (L) make an address during the annual CSU Epiphany meeting in the southern Bavarian resort of Wildbad Kreuth near Munich, Germany January 6, 2016. REUTERS/Michaela Rehle
German Chancellor Angela Merkel and Bavarian state premier and leader of the Christian Social Union (CSU) Horst Seehofer.
  • Why it matters

    Why it matters

    Conflict over the refugee policy, state elections and nominating candidates for Germany’s president will keep the parties occupied with themselves — and not other important matters.

  • Facts

    Facts

    • The alienation of German citizens from their government continues to grow in in 2016.
    • Critical state elections in Baden-Württemberg, Rhineland-Palatinate, and Saxony-Anhalt will be held in March.
    • Equalization payments in Germany — the mechanism for redistributing funds between the central government and states — costs taxpayers €10 billion annually, or about $10.9 billion.
  • Audio

    Audio

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Vice Chancellor Sigmar Gabriel recently stressed that, despite appearances, lawmakers weren’t only concerned about refugees these days.

But reality looks a lot different.

The new year is starting right where 2015 ended, in fact, with more open conflict on the issue between Chancellor Angela Merkel’s center-right Christian Democrats and their Bavarian sister party, the Christian Social Union.

Until the March elections, no top politician is going to allow another the least bit of success on a national level.

Any hopes that the conservative partner parties might find common ground were dashed at the CSU’s annual party conference in the Upper Bavarian town of Wildbad Kreuth.

And this year, the infighting may only get worse if the numbers of refugees don’t drop significantly by summer.

For Germans, everyday life goes on: They try to decide how to pay bills, spend more money on rising health insurance premiums and still save for retirement.

But all politicians are talking about is the refugee question — even if the way it is handled will change Germany forever.

Upcoming state elections in Baden-Württemberg, Rhineland-Palatinate, and Saxony-Anhalt will confirm to the German people that lawmakers aren’t really concerned about what matters to them — for example, the education of their children or digitization of their working world.

Until the March elections, no top politician is going to allow another the least bit of success on a national level. So it will be interesting to see whether the so-called Asylum Package II not only makes it through the cabinet, but also through the Bundestag and Bundesrat — the German parliament and legislative council that represents the 16 federal states.

Even if the party leaders were still of a mind, the policy-making experts have only gotten in each others’ way after two and a half years of no progress on important issues like the inheritance tax. The governing coalition — the conservative CDU-CSU and their partners in the center-left Social Democratic Party — is stymied.

Only in places where lawmakers ought to take a rest — such as more regulations for financial institutions or the equal pay law — are parliament members going full blast.

Depending on how the state elections turn out, party leaders and their parties will first of all have to sort themselves out. So there are no good prospects that in 2016 they will get back to work on real matters for once, instead of playing power politics.

At some point, German President Joachim Gauck, an independent, will also want to declare whether or not he is ready for a second term in office. Discussions in political backrooms are already in full swing. Even if Foreign Minister Frank-Walter Steinmeier of the SPD has denied any ambitions for the office, he linked it to Mr. Gauck not taking the post for a second term.

Conflict over the refugee policy, state elections and nominating candidates for Germany’s president will keep the parties occupied with themselves — and not other important matters.

That is not only disappointing for German citizens, but also fatal for Germany as a business location, given that economic risks in the next 12 months will only grow.

For instance, British Prime Minister David Cameron was in Wildbad Kreuth this week, trying to solicit concessions from Chancellor Merkel on changes to European Union rules, which Great Britain insists on under threat of leaving the 28-member E.U. bloc.

The latest weakness in China also greatly affects Germany’s export economy.

And in the nation itself? Equalization payments in Germany — the mechanism for redistributing funds between the central government and states — costs taxpayers €10 billion annually, or $10.9 billion. The federal subsidies endanger the balanced federal budget, and also delay getting rid of the solidarity tax, which was designed to help cover the huge costs of re-unification and economic development in the former East Germany.

Good numbers in the labor market aren’t guaranteed to last forever, and the Federal Labor Office has warned about rising unemployment later this year.

The dividends of Agenda 2010, the reforms to the German welfare system and labor relations, are almost gone.

Faced with all of this, what is the governing coalition doing? As minority partner, the SPD is currently working for labor unions on a right for associations to take collective legal action — something no one was missing until now.

On the other hand, calls for tax incentives for research have been dealt with dismissively.

First and foremost, the German Mittelstand — the small and medium-size companies that are so important to the economy — need more write-offs for investment in the digital future. Tax breaks for research and better possibilities for tax deductions would cost €9 billion a year, about a billion less than state equalization payments cost.

So there is work enough to do beyond the refugee policy. The CDU-CSU and the SPD should get together and get to it.

 

To contact the author: sigmund@handelsblatt.com

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