23 January 2014

German government: Clear work plan for the future

Summarised excerpts from the coalition government's programme:

Pensions package launched

Merkel announced that the pensions package will begin its path through parliament on 29 January. Federal Labour and Social Affairs Minister, Andrea Nahles, has the support of the entire Cabinet for the work on this measure. "I am optimistic that we can come to an agreement with all ministries by next Wednesday", said the Chancellor. The package will include a provision to allow individuals who have already paid social insurance contributions for a period of many years to retire at 63 without seeing their pension reduced, improved provisions for mothers and the topping up of pensions for individuals with reduced earnings capacities.

European Banking Union remains on the agenda

The issue of Banking Union will remain on the Cabinet’s agenda. The German government is already involved in talks at various levels in Brussels on this topic, explained Angela Merkel. 

New project "The good life – quality of life in Germany"

What do the people of Germany consider to be important? What constitutes a good life in terms of quality? All ministries will be planning to engage in dialogue with the people of Germany to answer these questions. It is not a question of material factors alone, but also of working time and a work-life balance, or to take another example, the question of who will look after me if I am sick, explained Angela Merkel.

Full press release

Seperately, Angela Merkel held her State of the Nation address in front of the German Bundestag. As reported by Wall Street Journal (subscription required), Merkel outlined her policy for her next term in office, addressing challenges ranging from the eurozone's recovery from its financial crisis to Germany's relationship with the US in the wake of the National Security Agency spying scandal.

She further underscored her support for closer economic integration in Europe, warning the crisis will never be overcome in the long term unless the bloc undertakes a "quantum leap" to fix the "lacking" economic coordination. As part of that, Ms Merkel called for "no financial product and no financial centre" to remain unregulated, and pledged her support for a financial transaction tax.

In her address, Merkel continued: "In an international social market economy, the state is still the guardian of order. Whoever is taking a risk also has to be liable for the losses - not the taxpayer. Much has been achieved in this respect, but much is left to do. This is why the rules for a Banking Union in Europe are so important to us and the bail-in cascade of central importance in case of a restructurisation or resolution of a bank. 

... Germany is only strong in the long term if Europe is strong as well. The European sovereign debt crisis may no longer be making headlines daily, we must see that it is at best under control; it has not yet been overcome. While we have an economic and monetary union in which national decisions have an impact on all Member States, we also have a monetary union whose economic policy coordination is still deficient. Without significant progress, without a quantum leap in this context we will not be fully able to overcome the European sovereign debt crisis. For this we need to strengthen the European institutions. For this we need a real economic union in which we will not be able to avoid a more binding character. I am convinced that the EU treaties need to be further developed."

Full address (in German)

On the topic of the new government's programme, Reuters reports that Germany is loosening its own pension rules while asking the EU for austerity at the same time. Despite criticism from industry and the pro-business wing of Chancellor Merkel's party, the cabinet endorsed what is likely to be the most expensive single measure of the legislative period when it moves through parliament in May, enabling an additional 900,000 workers to retire earlier than expected aged 63 over the next two years provided they have worked for 45 years. Some mothers will get pension increases, too. The Deutsche Bank research group writes in a briefing paper that this new German pension policy both ignores demographics and might indeed be sending the wrong signal to its eurozone partner countries that are still grappling with the financial crisis.

Spiegel Online and Handelsblatt report that the reform was criticised by the German industry as well as former SPD Chancellor Gerhard Schröder, whose "Agenda 2010" reforms cost his party support but also put Germany on a course for solid economic growth. "It's absolutely the wrong signal, especially in view of our European partners, from whom we've rightly been demanding structural reforms," Schröder wrote in a new book, an excerpt of which was published in Bild newspaper.

More on European politics

Spiegel Online also reports that SPD chief and economics minister Sigmar Gabriel - in contrast to his FDP predecessor -  has joined Wolfgang Schäuble in a recent meeting with Pierre Moscovici in Paris as part of a regular Franco-German policy coordination meetings of the "French-German economic and financial council" (FGEFC). Gabriel said that the Franco-German relationship and EU matters were of particular importance to him. The article says that the message to Angela Merkel is that the vice-chancellor is not ready to leave European policies to the Chancellery in the way that it happened in the past. Even though he has little hope of changing Angela Merkel's course at the moment, the SPD's weight in questions concerning Europe might shift if the SPD/PES' "common candidate" for the Commission President, Martin Schulz, manages to win the European elections in May. 

In an interview with La Tribune, Greek Europe Minister Dimitris Kourkoulas said of the German idea of "competitiveness contracts" for eurozone countries, that he was not sure that changing the EU treaties would be the right method to put those in place as this wouldn't be achieved during the present Council Presidency. "I think that stabilising the economy is important, but these contracts should also be given a social dimension", he said.

EP elections

As reported by the Frankfurter Allgemeine Zeitung, Germany's centre-left Social Democrats (SPD) have confirmed European Parliament president Martin Schulz as their top candidate for the May elections and at the same time for the post of Commission president. During a special SPD congress in Berlin, he received 97.3 per cent of the delegates' votes, writes Zeit. Schulz criticised the European Central Bank (ECB) in his speech, saying it should do more to encourage banks to support the European economy. He denounced excessive bureaucracy and said that tax fraud had to be combated more vigorously. He warned of the dangers of re-nationalisation: "I want a Europe that does not repeat the mistakes of 1914 in 2014", he said. Hatred, xenophobia and racism should have no place in Europe.

Merkel's Christian Democrats picked a political heavyweight, former Lower Saxony state premier David McAllister to head the CDU slate in the European vote.

The newly crowned candidate for Merkel's CDU's sister party CSU, Markus Ferber, has launched their election campain under the motto "closer to citizens, less bureaucracy", reports the Spiegel further. Party chief Horst Seehofer, however, points out that this should not be understood as an anti-European course. Their key demands are to shrink the size of the Commission, to prevent eurobonds and keep Turkey out of the EU. 

With sharp criticism of the Federal Government and the EU, the Alternative für Deutschland (AfD) has launched it's own European election campaign, reports Spiegel Online. The party congress elected their chairman Bernd Lucke as top candidate, but also ex-BDI President Hans-Olaf Henkel is supposed to play a prominent role. "More Europe is not the answer to Europe's problems", said Lucke. "We need the courage to talk openly about the advantages and disadvantages for our own country." 

© Bundesregierung