The German conservatives in general are known to be opposed to Turkey joining the EU as a full member. While Merkel has been an outspoken proponent of a 'privileged partnership' scenario, shadow foreign minister Wolfgang Gerhardt appears inclined to let the negotiations between the EU and Ankara determine the outcome. The CDU/CSU bloc also believes that the EU’s accession negotiations with Croatia should begin as soon as Zagreb’s co-operation with the international court in The Hague has been confirmed. Chancellor Schröder has been a major backer of Turkey’s EU membership bid. He has argued that the conservatives would make a fatal foreign policy mistake by blocking Turkey’s way into the EU. There are around 2.6 million Turks currently living in Germany. Of them, some 600,000 have been naturalised and are thus entitled to vote (there are a total of 61.5 million eligible voters in Germany).
A new conservative government in Germany is expected to be more business-oriented and more inclined to implement a series of key reforms. A CDU-led government might find it easier to implement reforms via its majority in the Bundesrat. Accordingly, the expected political changes in Berlin might give a boost to the EU’s Lisbon agenda.
Wolfgang Gerhardt (FDP), a possible candidate for the post of Germany’s next foreign minister, is known to be a moderate who attaches great importance to Berlin’s ties with Washington. In the FDP’s election platform Germany’s transatlantic relations are described as “the structural constant of German foreign policy since 1945”. Gerhardt has said that Berlin would not send troops to Iraq, though. He would seek to improve Berlin’s relations with London, and would adopt a “harder” line with Moscow. While Russia has been a top priority for Schröder, Merkel is expected to opt for cooler ties. Also, Gerhardt is opposed to the idea of lifting the weapons embargo on China. The Social Democrats, meanwhile, emphasise the need for Germany to have a permanent seat in the UN Security Council (a goal opposed by the Left Party), and for all EU member states to ratify the European Constitutional Treaty.
As opposed to the Social Democrats, the German conservatives are expected to take a tougher line in Berlin’s discussions with Brussels on the EU’s long-term financial perspective. Germany, the EU’s biggest country, is the biggest net contributor to the Union’s budget. Given their strong rural roots, the CDU/CSU bloc is not likely to be more conciliatory on the Common Agricultural Policy (CAP).
Schröder came to power on his promise to resolve Germany’s unemployment problem, which peaked during the preceding Kohl era (CDU/CSU-FDP). However, seven years down the road, the unemployment figure remains stubbornly around 11%. As its next step, the SPD has now proposed to establish a minimum wage and to increase the unemployment benefit in the eastern Länder (which currently stands at 331 euros per month, while the respective figure is 345 euros in the West). The package, known as the Hartz IV reforms, aims to cut the cost of the welfare state and make the country’s labour market more flexible. However, the Hartz reforms have proven unpopular and sparked a series of protests. The CDU, meanwhile, seeks to liberalise the labour market by relaxing the legislation that governs redundancy in companies with less than 20 employees. Furthermore, the conservatives have vowed to slash labour wage costs and to curtail the grip of trade unions and employers’ associations.
Widely considered the most important and complex issue in the election campaign. Merkel aims to increase Germany’s VAT from 16% to 18% effective January 2006. The projected extra revenue, totalling some 16 billion euros, is earmarked in her plans for funding the country’s non-wage labour costs. The plan also envisages slashing by 2% the amount paid by employers for unemployment insurance. Currently this represents 6.5% of wages. Further tax reductions are scheduled for 2007, when Merkel aims to cut the top tax rate from 42% to 39%, the basic rate from 15% to 12%, and the corporate tax rate from 25% to 22%. The conservatives' shadow finance minister, Paul Kirchhof, has proposed a flat tax and a scheme to curb all tax loopholes. However, in the runup to the vote both Kirchhof and his flat tax plans appear to have been sidelined by the conservatives. All in all, Merkel promises to boost Germany’s central tax revenues by 3 billion euros, and she says that this sum would enable the country to bring its public deficit below 3% of GDP within four years. Meanwhile, the Social Democrats have proposed introducing an additional “wealth tax” for the richest, which they expect would add 1.2 billion euros per year to the state’s coffers. The SPD believes that raising the VAT would be a “step in the wrong direction”, and the Greens as well as the Free Democrats agree with this position.
Germany’s so-called ecotax on fuel is widely expected to be kept by the conservatives if they come to power after the elections. The ecotax was introduced by the Red-Green coalition at the initiative of the Green Party in 1998. It adds 15 eurocents per liter to the price of gasoline. The revenue generated by ecotax has mostly been used to fill gaping budgetary holes, among them to finance pensions and to offset the rising costs of labour.
Merkel aims to reverse the current Schröder cabinet’s drive to phase out nuclear energy, which accounts for some 30% of Germany’s power needs. The Social Democrat-Green coalition has been working to close down the country’s nuclear power plants by 2020. The German economy is strongly dependent on oil, and the Social Democrats have been promoting alternative energy sources such as solar, wind and hydro power. Merkel would continue to focus on renewables (the aim would be to make them responsible for 12.5% of the country’s total energy supply), but would reconsider the “economically irresponsible” subsidies to that sector.
Starting in January 2007, Merkel aims to pay out 50 euros per month for every child born in Germany. The bonus would last until the child reaches the age of 12. The obvious aim is to attempt to halt the decline of Germany’s birth rate, which currently stands at 8.33 births per 1,000 population. The SPD is offering to pay one parent 75% of their income for 12 months to stay at home after the birth of a child. All this against the backdrop of the so-called 'demographic dilemma', ie that it will become increasingly difficult to pay pensions after 2020 if the present demographic decline continues.
Health + social care
Merkel has proposed introducing a flat monthly fee of 109 euros for health care. This would have to be paid by all regardless of their wage. The aim is to breathe new life into the country’s ailing and virtually bankrupt health care system. The CDU-CSU bloc also plans to introduce a system of “solidarity-based health premium” and to increase competition among the country’s state and private insurance providers. Meanwhile, the SPD seeks to establish a system for health insurance contributions which is based on all incomes and not only on wages. The Social Democrats’ aim is to turn health insurance into “citizens’ insurance”.