Global IssuesGERMANY: Crisis Shackles New Govt
The economic crisis looks set to reduce the new government's commitments in development and environmental policy.
The elections Sunday paved the way for a new government of the ruling Christian Democratic Union (CDU) party of Chancellor Angela Merkel, and the Liberal Democratic Party (FDP).
The new coalition of the CDU and the FDP, which obtained 34 percent and 14.6 percent of the vote, faces almost intractable financial constraints.
Germany's economic output is expected to shrink 5 percent this year. The national debt will reach 1.7 trillion euros this month, and will continue to rise. The fiscal deficit will cross the limit of 3 percent of GDP set by the European Monetary Union.
The crisis is likely to deepen next year. Unemployment is expected to cross four million. The government will have to take on a new debt of over 100 billion euros, in the face of earlier plans for only six billion euros.
The new government may have to break election promises. The FDP's main electoral campaign promise was to cut tax without reducing social and other state services.
Most economists agree that such a plan is not realistic. The government's economic advisor Wolfgang Franz said at a press conference Monday, 'Tax increases are unavoidable. If the government wants to stop state debts, it must increase taxes, especially valued added tax.'
A dramatic fall in exports is also forcing the government to stimulate domestic demand.
'The new government must reduce spending, but at the same pay attention not to choke off economic activity,' political commentator Ulrich Schaeffer wrote in the daily Sueddeutsche Zeitung.
Others are asking for cuts in state spending on the environment, on development aid and on the military. Norbert Walter, head economist at Deutsche Bank, says the new government should reduce subsidies for renewable energy.
There are concerns also over commitments to development aid, which has no strong advocates within the new government.
Under the earlier Social Democratic Party (SPD) government development aid rose from 0.27 percent of the country's gross national income in 1998 to 0.38 percent in 2009. The budget of the ministry for economic development and cooperation rose by 679 million euros in 2009, an increase of almost 14 percent over last year.
The SPD, which was in government the last 11 years, suffered its worst defeat, and obtained only 23 percent of the vote. Since 1998, the SPD has lost 10 million voters.
Support for social democracy has declined sharply. In 1969, the SPD won 43 percent of the vote; 20 years later, in 1998, it almost repeated the score, getting 41 percent. By 2005, the SPD share had fallen to 34 percent, and now it is down to 23 percent.
The SPD decline comes with the emergence of the new Left party, formed by Social Democratic dissidents and former East German Communists, and the consolidation of the environmental Green party. While the Left party obtained 12 percent of the vote, the Greens reached 11 percent.
This electoral constellation, together with massive abstention - more than 18 million German citizens did not vote — will push the SPD towards reform, says Prof. Franz Walter from the University of Goettingen. 'The SPD has to revise its positions on labour and social policies, and also its attitude towards the Left party, to make possible a new left-wing alliance.'
The new government is likely to introduce unpopular changes in energy and environmental policy. Both the CDU and the FDP announced during the campaign a revision of the phasing out of nuclear power, that had been decided by the SPD government in 2002, and to authorise genetically modified agriculture.
Both parties in coalition denied any plans for constructing new nuclear power plants, but both announced that their new government will revise the shut- down of functioning reactors, and authorise an extension of their lifespan beyond scheduled closure.
© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service