Carsten Brzeski, Senior Economist, ING Belgium

Germany (almost) Has A New Government

Carsten Brzeski, Senior Economist, ING Belgium

Early this morning, the two Christian-democratic parties (CDU and CSU) and the social-democratic SPD reached a final coalition deal. Details of the deal will only be presented later today. Up to now, the only settlements known are a deal on a minimum wage of 8.50 (with some exemptions), a reduction of the retirement age to 63 years for persons with a work life of more than 45 years, a pension increase for mothers with children born before 1992, a principal agreement on a highway toll and changes to dual citizenships.

Apparently, all these new measures will be implemented without tax increases but with a high portion of wishful thinking. The final coalition deal will now go to a ballot of SPD members to be signed off, with the result expected in mid-December.

For a fundamental assessment of the coalition deal, we still have to wait until this afternoon when the full programme will be presented. Judging from the details available so far, however, it looks as if the new government’s focus is on redistributing the harvest of earlier economic reforms, rather than using the economic good times for new structural reforms, increasing the economy’s potential growth rate.

Up to now, there is no information about new investment plans or a German vision for Europe and the Eurozone. Let’s hope that our wishes will be fulfilled later today. If not, this coalition deal could eventually end as a missed opportunity.

 

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