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28 October 2003

EZA 564 Germany-Politics




German reform momentum grows with alternative to social market
Despite resistance from trades unions and the Bavarian CSU opposition party, momentum for reform in Germany is gathering strength. Passage of the key parts of Chancellor Gerhard Schröder's reform agenda 2010 is unlikely to appease reformers around Economics Minister Wolfgang Clement. But its modest labour market and public health care deregulation plus some stop-gap measures for public pensions have sparked a debate on a more fundamental overhaul of the social system and labour market. Opposition Christian Democratic Union (CDU) leader Angela Merkel is trying to unify the right behind a clear-cut alternative to the 'social market economy' - the core of German cross-party consensus since the 1960s. The liberal Free Democrats (FDP) now signal consent to reform of craft trades. The next bits of deregulation – craft trades, municipal taxation – are not ambitious in themselves but may be a door-opener for a more general break-up of outdated regulatory structures. The government think-tank on pension reforms has had its brief extended to cover private pension funding; income tax cuts planned for next year are linked to a broader simplification of taxation.

SummaryAsset Conclusions: Assets related to investment should outperform consumer-related as real cuts in pensions, jobless benefits hit consumption

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© Graham Bishop

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