• Germany's news in English

Business community expecting economic reforms from Merkel

AFP · 28 Sep 2009, 18:07

Published: 28 Sep 2009 18:07 GMT+02:00

Facebook Twitter Google+ reddit

The German Association of Chambers of Commerce and Industry (DIHK) called her victory in Sunday's election "a clear vote for courageous reform." Its president Hans Heinrich Driftmann said corporate tax cuts should now be "high on the agenda."

The Federation of German Wholesale and Foreign Trade called for "simplified taxes, less bureaucracy and more entrepreneurial freedom."

But analysts wondered how far the conservative Merkel would go in making painful reforms after she stressed the need to "maintain a balance between those who create jobs and workers."

During her first campaign, Merkel had called for major changes to Germany's economic system. It provides generous social benefits and its heavy reliance on exports left it exposed during the global economic downturn.

"Over the last four years her position has become quite blurred" while she governed with the centre-left Social Democrats in a cumbersome "grand coalition," Goldman Sachs economist Dirk Schumacher told AFP. "Where does she actually stand" now on the issue of restructuring the German social economic model, he asked.

The new government faces a mountain of serious challenges, including rising unemployment and a huge public deficit that stems from efforts to buffer Germans from the worst of the international crisis.

At the same time, Merkel's new coalition partners, the business-friendly Free Democrats (FDP), have gained in strength and will push for multi-billion-euro (dollar) tax cuts and a simpler tax code.

"The new government must therefore manage a tricky balancing act between fiscal consolidation and implementing new strategies for supporting growth," UniCredit economist Alexander Koch wrote.

Business daily Handelsblatt said FDP leader Guido Westerwelle "should demonstrate the courage of new thinking and demand a super ministry of economy

and finance - and then lead it himself."

But Commerzbank chief economist Jörg Krämer noted that "scepticism of the Germans against capitalism has risen significantly," despite the FDP's strong showing. "This makes a general shift in economic policy quite unlikely," he said.

The country's crumbling demographic base could eventually force Germans to retire later, and education reform is needed to help disadvantaged youths gain full access to the jobs market.

"Otherwise you'll have a growing percentage of the population who are just dependent on government transfers and who won't be able to get a job," Schumacher warned.

The jobless rate has been largely held in check by state-subsidised shorter working hours but is still expected to climb from its present level of 8.3 percent.

"The silver bullet would be a lower tax and social security burden in order to avoid another round of stagnating real income," Koch wrote.

Story continues below…

But he agreed that "the fiscal leeway in the next few years is slim," since Germany expects to breach EU deficit rules until 2013 at the earliest.

Bank of America Merrill Lynch European economist Holger Schmieding therefore anticipated "some tax cuts, spending restraint and modest structural reforms to strengthen the incentives to work, invest and create jobs."

The Süddeutsche Zeitung daily said Merkel's inner drive for change was not

lost however, and quoted her as saying recently that "Germany is in a global competition and can take nothing for granted."

She warned Germans again Sunday: "We have a lot of work ahead of us." Schumacher concluded that "if that's the genuine Merkel, then we'll see some kind of more pronounced reforms" in the next few years.

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Student fined for spying on women via their webcams
Photo: DPA

Student from Munich fined €1,000 for spying on 32 different computers, using their webcams to take photographs, or record their keyboard history.

This is how much startup geeks earn in Germany
Photo: DPA

A comprehensive new survey of 143 startup founders shows how much you are likely to be earning at a German startup, from entry level all the way up to sitting on the board.

Man dies after beating for peeing near Freiburg church
The Johannes Church in Freiburg. Photo Jörgens Mi/Wikipedia

A middle-aged man from southern Germany has died after being attacked by a group of men who took umbrage with the fact he was urinating in the vicinity of a church.

The Local List
Seven German celebrities with uncanny doppelgängers
Former Berlin mayor Klaus Wowereit and actor Alec Baldwin. Photo: DPA; Gage Skidmore, Wikimedia Commons

Check out these seven look-a-likes of well known German figures - we admit that some are more tenuous than others...

Israel seeks to buy three new German submarines: report
A Dolphin class submarine. Photo: DPA

Israel is seeking to buy three more advanced submarines from Germany at a combined price of €1.2 billion, an Israeli newspaper reported Friday.

Here’s where people live the longest in Germany
Photo: DPA

Germans down south seem to know the secret to a long life.

More Germans identify as LGBT than in rest of Europe
Photo: DPA

The percentage of the German population which identifies as lesbian, gay, bisexual or transgender is higher than anywhere else in Europe, according to a new study.

'Reichsbürger' pair attack police in Saxony-Anhalt
File photo: DPA.

A "Reichsbürger" and his wife attacked police officers on Thursday, just a day after another Reichsbürger fatally shot an officer in Bavaria.

Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Parents who don't get nursery spot for kid entitled to pay
Photo: DPA

The Federal Court of Justice (BGH) ruled on Thursday that parents whose children don't receive placements in nursery care are entitled to compensation.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd