German elections and the EU [Archived]

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The inconclusive result of the elections in Germany on 18 September has for now left unclear how the country will address the key policy issues ahead.

Background

  • Between 2001 and 2004, Germany’s GDP (gross domestic product) increased by an average annual rate of 0.6% (against the eurozone’s combined average of 1.3%)
  • There are five million unemployed, or over 10% of the workforce (the eurozone average is 8.7%). The dole figure is as high as 20% in many eastern regions
  • The volume of German exports has grown by 57% since 1999 (faster than anywhere else in Europe). Germany is the world’s leading exporter, selling 733 billion euros worth of good per year
  • Eastern Germany remains a major problem for the country: in a classical boom and bust scenario, billions have been spent on industries which have eventually imploded, sending unemployment to ever new heights

Faced with mounting economic and social problems, and having suffered a crushing electoral defeat in his SPD party’s former stronghold of North Rhine-Westphalia, Chancellor Gerhard Schröder announced in May 2005 that elections would be held a year ahead of schedule. It is the fourth time in Germany’s post-war history that elections have been brought forward. 

At present, the upper house of parliament (Bundesrat) is controlled by the CDU-CSU, and thus the conservatives can block Chancellor Schröder’s bills passed by the SPD-Green coalition’s slim majority in the lower house (Bundestag). 

The parties:

Social Democratic Party (SPD):

  • www.spd.de
  • A party with Marxist/Lassallist roots formed in the late 19th century
  • Repositioned as ‘left of centre’ in the 1960s
  • Having spent 16 years in opposition under Chancellor Kohl, the SPD with Gerhard Schröder at its helm went into government with the Greens in 1998 -their ‘Red-Green’ coalition was re-elected in a narrow vote in 2002
  • The SPD’s election programme is entitled 'Vertrauen in Deutschland' [Confidence in Germany] 

Christian Democratic Union (CDU):

  • www.cdu.de
  • Formed in 1945, the party has been advocating the free market coupled with the state’s involvement in social issues
  • In government between 1982-1998
  • Headed by Angela Merkel since 2000. If elected, the 51-year-old physician from Eastern Germany would become the country’s first woman chancellor
  • The CDU’s election programme is entitled „Deutschlands Chancen nutzen. Wachstum. Arbeit Sicherheit.' [Make the best of Germany’s opportunities: Work, growth, security]

Christian Social Union (CSU):

  • www.csu.de
  • The CDU’s sister party, was founded in 1946 - it stands for election only in Bavaria
  • Generally more conservative than the CDU but with a stronger social agenda 
  • Headed by Bavarian Premier Edmund Stoiber since 1998

The Greens ('Bundnis 90/Die Grünen):

  • www.gruene.de
  • A federal political party since 1980. Initially relied almost exclusively on environmentalism, but has since developed a comprehensive centre-left agenda
  • Made it into parliament in 1983 and again in 1987 - became junior coalition partner to the SPD in 1998
  • Top candidate for the Greens in the elections was current Foreign Minister Joschka Fischer. 

Free Democratic Party (FDP):

  • www.fdp.de
  • Liberal party formed in 1948
  • Junior coalition partner to the CDU between 1982-1998 - before that in SPD-FDP government
  • Headed by Guido Westerwelle 

The Left Party (Linkspartei):

  • www.sozialisten.de  
  • New alliance formed in 2005, combining the former communist Party of Democratic Socialism (PDS) and the likewise new Labour and Social Justice Party (WASG)
  • Rooted in East Germany (PDS) but also supported in West 
  • Fighting for higher wages and unemployment benefits, more taxes on highest incomes, a higher minimum wage and a 30 billion euro state investment programme for boosting growth 
  • Headed by former SPD chairman Oskar Lafontaine and Gregor Gysi of PDS

The results (preliminary):

Party % of votes No of seats
CDU/CSU (Black) 35.2 225
SPD (Red) 34.3 222
FDP (Yellow) 9.8 61
Left Party 8.7 54
Greens 8.1 51

Voting in the district of Dresden has been delayed until 2 October due to the recent death of a candidate there. However, the outcome of that vote - to be cast by some 220,000 eligible voters - is unlikely to tip the balance of power.
 

Issues

Turkey 

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). 

Lisbon agenda

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. 

Foreign policy

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. 

Financial perspective

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).

Unemployment 

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. 

Taxation 

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. 

Ecotax 

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. 

Nuclear energy

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. 

Birth rates

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”. 

Timeline

  • The parties have 30 days time to elect a new chancellor, who is proposed – after consultations with the parties - by the German President, Horst Köhler (until 18 October). The new chancellor needs to be elected by an absolute majority (Constitution, Article 63). 
  • If no new chancellor is elected within 30 days the President will ask the acting chancellor to stay in power until a new chancellor has been elected (Constitution, Article 69).
  • If there is no absolute majority for the proposed chancellor, the parliamentarians have two weeks to elect a chancellor from among their own ranks by absolute majority. Voting continues until a chancellor is selected by an absolute majority. Several candidates can be put forward for election. 
  • If no chancellor is elected by an absolute majority, there is a third voting phase, in which the candidate who receives the most number of votes is elected. If he/she receives an absolute majority, he/she is declared chancellor within seven days.
  • If he/she received the most number of votes, but no absolute majority, the President can decide to dissolve parliament and call for new elections.  

Further Reading

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