Should major policy changes be expected from Germany’s election in September?

This article is part of a report which I drafted for a FinTech company based in the United Kingdom. It has been submitted in the month of August, which is why some facts might be outdated (especially in this case, as this post dates back before the election in Germany). This article was completed at the beginning of July.

On September 24, the German electorate will head to the polls to vote for a new parliament. Germany runs on a parliamentary system in which the Chancellor is voted in (after the formation of a government majority) by the Bundestag. As of now, the incumbent Chancellor Angela Merkel, in a coalition with the Social Democratic SPD is seeking re-election coming autumn. Merkel had governed a very large and stable majority for the last four years and is now attempting to prolong her time as Chancellor, a role she has had since 2005.

Merkel’s centre-right CDU/CSU presented its manifesto on the 3rd of July. It stresses  the party’s main goal for the coming four years: working towards full employment. During the press conference in which the manifesto was presented, Chancellor Angela Merkel said [1]:

“We have set the goal that we want to achieve full employment by 2025. We think that we can do that. Think back to 2005: people would have laughed at us if we would have defined such a goal.”

One part of the full employment-strategy that the German centre-right wants to implement is the creation of new jobs. The manifesto [2] points to the digital market, biotechnologies, environmental technologies as well as the health- and service industry, as examples for  industries it tries to attract to the Bundesrepublik.

In terms of the digital market, Merkel intends on declaring it a “top-level decision issue” by creating a state ministry for digital policy. The Chancellor considers updating the digital infrastructure of the country as a key importance for attracting new companies. In order to achieve that, the manifesto demands a country-wide accessibility of fiber-optic networks until 2025 and pushes for a 5G mobile network.

When it comes to taxation, Merkel’s CDU/CSU promises no tax increases in the coming legislature. In case of the existence of agreements of automatic exchange between tax administrations, the centre-right favours scrapping the flat-rate withholding tax and replacing it with individual taxation. Merkel also renews her vow for the introduction of a financial transaction tax “together with other EU members”.

Merkel’s hottest contender for power in Berlin is the Social Democrat SPD. The party of Merkel-opponent Martin Schulz intends on a so-called “spending offensive” to boost the economy by “encouraging” companies to invest. The party’s manifesto [3] goes into very little detail on this proposal and provides little insight on changes regarding fiscal policy. The only insight  is given on corporation tax is a chapter regarding tax evasion, which the SPD wants to fight more vehemently through the OECD.

More interesting is the manifesto of the Liberal Democrat FDP. This is not only because this party has been known to be favourable towards more free markets, but also because while polling up to 8 per cent at this stage, it could become a coalition partner of Merkel’s CDU/CSU. This becomes increasingly likely, the more the SPD clashes with Merkel’s centre-right over issues like gay marriage, as happened recently. [4]

The FDP suggests [5] large investments in the education sector, in order to boost the attractiveness of Germany as a place for international companies. More importantly, the Liberal Democrats criticise the Energiewende (the German energy transition), whose radical phasing-out of nuclear energy is constantly increasing energy prices for all consumers. Leaders of the FDP also advocate for less bureaucracy, as government should not stand in the way of the entrepreneurial spirit. The party in itself is often described as following the philosophy of ordoliberalism, meaning a largely free market under the watchful of a minimal state.

Other parties which will enter (and re-enter) the houses of parliament are the Alternative für Deutschland (Alternative for Germany), a social conservative and eurosceptic party which, due to its stance on the European Union, is out of consideration for both Merkel’s CDU/CSU and Schulz’s SPD. In the past, the Social Democrat SPD had considered coalition agreements with the Green Party and the far-left Die Linke (literally, The Left), but refrained from the option due to the radical views of the latter. Die Linke is the successor party of the East Germany unity party SED.

A consequence of the election in September will be a more diverse parliament. However, if the more market-oriented Liberal Democrats fail to score above the current projections, Merkel is most likely to resort to the current coalition with the Social Democrats. This means that no major policy changes are to be expected after the upcoming election.

[1] Wohlstand und Sicherheit für alle – So soll das gehen, Die WELT, 03/07/2017

[2] Für ein Deutschland, in dem wir gut und gerne leben. Regierungsprogramm 2017 – 2021, CDU/CSU manifesto for the 2017 parliamentary election, 03/07/2017

[3] Es ist Zeit für mehr Gerechtigkeit: Zukunft sichern, Europa stärken. Das Regierungsprogramm 2017 bis 2021, SPD manifesto for the 2017 parliamentary election, 26/06/2017

Click to access Es_ist_Zeit_fuer_mehr_Gerechtigkeit-Unser_Regierungsprogramm.pdf

[4] Germany legalizes gay marriage, Merkel votes against, Politico, 30/06/2017

[5] Schauen wir nicht länger zu. Programmentwurf  der Freien Demokraten zur Bundestagswahl 2017, 31/03/2017

Click to access 170330-entwurf-bundestagswahlprogramm-fdp.pdf

About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s