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From climate action to ‘Soli tax’: What you need to know about Germany’s planned changes

Angela Merkel is returning from her summer break on Monday, but she's in for a busy few months ahead. From climate change action to tax amendments, this is what the government is planning.

From climate action to 'Soli tax': What you need to know about Germany's planned changes
The solidarity tax will be reduced. Photo: DPA

It’s been a busy year for the Chancellor so far due to an unsettled political climate in Germany, Brexit – and even her own personal health concerns.

So it’s no surprise that Merkel looked relaxed on her summer holiday where she's been taking a few weeks of rest with her husband.

She is set to return to work this week and faces a rocky road with three upcoming eastern state elections and issues that are dividing the population (and the government). Can Merkel's coalition survive?

What's the outlook?

The coalition (known as the grand coalition or GroKo) is made up of Merkel’s Christian Democrats (CDU) and its Bavarian sister party (CSU), along with the centre-left Social Democrats (SPD). 

Things have been shaky between the two parties from the very beginning of their most recent union following the 2017 federal election. But both parties – typically known as the Volksparteien (people’s parties) in Germany – are under increasing pressure with three regional votes coming up. 

After dismal results in recent state elections, such as Bavaria and Hesse last year, and in the European parliamentary elections in May, both parties face heavy losses when voters in Saxony and Brandenburg go to the polls on September 1st, and in Thuringia on October 27th. 

The SPD, currently in free-fall after historically low results in state elections over the past year, are looking for a new leader and there is never-ending speculation about the party pulling out of the coalition which would 'break' the government and lead to elections.

If the GroKo doesn't split apart then the next federal elections are to take place in 2021. Merkel has already said she will bow out of politics and step down as chancellor after this term ends.

Adding to the uncertainty is the possibility of a no-deal Brexit and various domestic issues concerning climate change and migration.

Merkel on her birthday, July 19th, before her summer break. Photo: DPA

Here are some of the major issues that Germany wants to tackle in the coming months:

Climate protection

This topic has been thrust into the spotlight due to action led by activists like Greta Thunberg and the Fridays for Future movement. And Germans have become increasingly concerned about the effects of climate change.

That worry has translated into soaring support for the Green party, which has been neck-and-neck with the Christian Democrats in some recent polls (and even topped a few polls).

Meanwhile, another recent survey showed German voters are in favour of drastic action to protect the climate, such as making flying more expensive and travelling by rail cheaper.

All parties are taking note of this and the Climate Cabinet will meet on September 20th to decide the government’s action plan to reduce CO2 emissions. 

CDU leader Annegret Kramp-Karrenbauer on Sunday called for an overhaul of the country's tax system in order to better align Europe's largest economy with its environmental goals.

In the Welt am Sonntag newspaper, Kramp-Karrenbauer, who is also Germany’s Defence Minister, and Union deputy leader Andreas Jung, said tackling climate change deserved to be a top priority in the government's agenda.

She said Germany should offer businesses and residents further incentives to help reduce carbon emissions, such as subsidies for the development of climate-friendly fuels and to improve the energy efficiency of buildings.

Kramp-Karrenbauer also called for the inclusion of sustainable development as a state goal in the constitution, but said she didn't support a 'CO2 tax', an idea that's been debated in recent months.

The budget 2020

How will Germany spend its cash next year? Finance Minister Olaf Scholz, of the SPD, has been calculating what Germany can afford, when and how.

But the Finance Ministry is not known for offering much flexibility. One of the main questions is: how will climate protection be financed? This will require some creative thinking, and possibly new debt – something that Germany as a country is averse to.

Discussions on the budget are likely to take place in September. 

A Fridays for Future march in Hamburg on June 14th. Photo: DPA

Basic pension

Earlier this year, Labour Minister Hubertus Heil, of the SPD, presented his plan on introducing a basic pension (Grundrente) in Germany. It would see people who have clocked up 35 years of work, raised children or cared for relatives receive a supplement to their pension. It is intended to help those who receive a small pension.

But the Union is opposed to the basic pension being paid if the person concerned is not in need – for example, if that person has a partner with a good income who can support them. The coalition agreement also provides for means testing. However, Heil (SPD) insists on the model without means testing to avoid bureaucracy.

Housing

Several planned measures for tenants and house buyers are being debated in the government. For example, Justice Minister Christine Lambrecht (SPD) wants to see that landlords have to pay back excess rent retroactively if they violate the rent brake – a controversial proposal.

There is also a planned reform of the rent index, which will be used to determine how much rent can increased by.

A housing summit is planned to take place on September 21st.

Care crisis

In order to attract more urgently needed nursing staff, the government is planning a whole range of measures. Among other things, care givers should receive better pay and have improved working conditions, according to Health Minister Jens Spahn.

READ ALSO: How Germany plans to fight its drastic shortage of care workers

But it could cost up to five billion euros per year and there have not been concrete discussions on where that money could come from. Ordinary people may face higher contributions to pay for it.

Reducing the 'Soli tax'

But there are changes ahead for taxpayers in Germany. Finance Minister Olaf Scholz presented a draft bill last week for approval to other government ministries, which would see 90 percent of taxpayers completely freed of the solidarity contribution from 2021. The tax, known as the “Soli,” amounts to 5.5 percent of income tax and corporation tax.

For 3.5 percent of taxpayers – the top earners – the Soli will still be in place at the current rate. Meanwhile, another 6.5 percent of taxpayers would see their Soli contribution reduced. 

The payment, which brought the state €18.9 billion in 2018, was first introduced in 1991 to help cover the costs of reunification and invest in infrastructure in the former East Germany. It was originally meant as a temporary measure but was made permanent in 1995.

A 'Solidary Pact' was then agreed in 2001 in a bid to financially support the eastern German states but that pact expires at the end of this year.

The CDU is pushing to get rid of the tax completely.

Schools and daycare improvement

More than €10 billion of government cash is expected to go to schools and day care centres (Kitas) in the coming years through the “Gute-Kita-Gesetz” (Good Kita Law) and the “Digitalpakt Schule” (School Digital Pact).

All of Germany's states will receive funding to improve the number of day care staff and create better working conditions and longer opening hours (which means more Kita spots) as well as pushing up education quality.

A Kita in Düsseldorf. Photo: DPA

An overview of how eager German schools have been to access and use the funds from the Digital Pact, aimed at upgrading digital equipment, should be available in autumn. The money has been available since May.

Security policy

Should the expiring mandate for the Bundeswehr (German army) mission against the terrorist group Islamic State (IS) in Syria and Iraq be extended? The CDU/CSU and Foreign Minister Heiko Maas (SPD) believe this could be a good idea but SPD faction leader Rolf Mützenich rejected an extension.

SEE ALSO: More women soldiers and less equipment: A look at Germany's army in numbers

A decision is also pending on the future of the arms export ban to Saudi Arabia, which will expire at the end of September.

International headaches

Brexit continues to cause stress for Europe and Germany has upped its preparations for a no-deal amid fears of job losses and uncertainty over the market.

Merkel has invited Boris Johnson to Berlin following his appointment as Prime Minister.

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GERMANY EXPLAINED

EXPLAINED: How October 3rd became Germany’s national holiday

Compared to many other countries, October 3rd is a relatively new nationwide holiday, marking 32 years since German reunification. Aaron Burnett explains the background to it and why it's celebrated on this particular date.

EXPLAINED: How October 3rd became Germany's national holiday

Independence Day in the United States dates all the way back to 1776. Canada Day, celebrated on July 1st, goes back to 1867. France’s Bastille Day on July 14th commemorates the storming of the Bastille in 1789.

Compared to those national holidays, Germany’s October 3rd is fairly recent, having only been around since 1990.

October 3rd – or Tag der Deutschen Einheit – marks the date that the former West and East Germany officially became one country again, after being divided since the end of WWII. In 2022 it’s celebrated on a Monday, meaning many people will get a long weekend. 

Between 1945 and 1949, the country was split into four occupation zones – held by the Americans, British, French, and the then Soviets. In 1949 the Soviet zone became the communist East Germany – or Deutsche Demokratische Republik (DDR), while the rest of the country became the West German Bundesrepublik Deutschland (BRD).

The Bundesrepublik continues today, but now with the five eastern federal states, plus East Berlin, that were formerly in the DDR.

Why October 3rd and not November 9th?

Less than a year before official reunification on October 3rd, 1990, the Berlin Wall fell on November 9th, 1989.

At first glance, November 9th might seem a better day to commemorate as a national day.

Growing up in Canada, my Gelsenkirchen-born Oma used to talk about the Berlin Wall falling with a slight waver in her voice – and sometimes even tears – decades after it crumbled before her eyes on her television screen.

November 9th, 1989 is remembered by many Germans as the happiest day in the history of the country, but the anniversary of the Berlin Wall’s fall is not observed as a national holiday.

‘It was the happiest day in German history,’ she told me at the time. ‘People were just so amazed at seeing that and no one really thought it would actually happen and guck mal – there it was. It was very emotional at the time and I guess I still am too,’ she would say.

READ ALSO: ‘There was a human tide moving’: Berliner remembers crossing the Wall

For Oma and many other German-Canadians I grew up around, Unity Day felt a little less momentous than November 9th. To them, October 3rd was an important day to observe, but conjured up a few less emotions.

‘November 9th suddenly made the dream of having a unified Germany again seem possible,’ my teacher at Calgary’s German-Canadian Club told me years ago. ‘By the time it was actually official, it just seemed like the final step of something that had been going on for a while already.’

To my Oma, my teacher, and others I grew up around who remembered that time – German reunification seemed inevitable within days of the Wall falling. But it wasn’t necessarily guaranteed. Even after the Wall fell, the DDR and BRD remained separate countries at first.

The months between November 9th, 1989 and October 3rd, 1990 were momentous – and saw several additional events that would pave the way for reunification.

On March 18th, 1990, the DDR would hold its first – and only – free and democratic elections. Won by the East German Christian Democrats, their leader Lothar de Maiziere served as GDR Premier until reunification on October 3rd.

Lothar de Maiziere, the first and only democratically elected leader of East Germany, at a German reunification celebration on October 3rd, 2020.

In Spring 1990, Bonn and Berlin agreed to convert the East German Ostmark – which was practically worthless at the time – to the West German Deutschmark on a largely 1 for 1 basis, with most salaries, prices, and savings being converted straight over.

Finally, the process for legal reunification took months, with the signing of an economic and currency union, the reconstituting of the five eastern federal states that had been abolished in communist times, the official reunification treaty, and the treaty that saw the WWII allies renounce all rights and responsibilities in Germany.

READ ALSO: What unity means to eastern Germans

At the stroke of midnight on October 3rd, 1990 – a reunified Germany became a fully sovereign state for the first time since WWII. That was thanks in large part to both political will and legal work in the months immediately following the Wall’s fall.

Although it seems so normal now, reunification was never guaranteed, which is part of why October 3rd enjoys and deserves its own special commemoration.

November 9th – German history’s double edge

The other major reason why October 3rd serves as Germany’s national day instead of November 9th is that November 9th, while associated with the happy elation of witnessing the Berlin Wall crumble, is also linked to many other momentous – and often solemn – historical commemorations.

On November 9th, 1918, Kaiser Wilhelm II abdicated. Within hours, the Social Democrats and the Communist Party both declared the Weimar Republic and a ‘free, socialist republic,’ respectively. It would serve as the first sign of political instability that eventually allowed the Nazis to take power.

On November 9th, 1923, Adolf Hitler attempted a coup that started in a Munich beer hall. He was arrested and wrote Mein Kampf during his time in jail.

November 9th was not chosen as Germany’s national day partly because of the solemn commemorations attached to it, such as Kristallnacht on November 9th, 1938.

And on November 9th, 1938, Jewish businesses and synagogues were violently targeted during Kristallnacht, or the “Night of Broken Glass.” At least 90 Jews were killed and 30,000 deported.

As happy as November 9th, 1989 was, commemorating it as Germany’s national day would be problematic given the other solemn observances attached to it, which is also part of why October 3rd was chosen.

READ ALSO: Why November 9th is a fateful day in German history

What days does October 3rd replace?

Both East and West Germany had national holidays before reunification. The DDR observed ‘Republic Day’ on October 7th, the anniversary of its founding in 1949. Before 1990, the BDR commemorated June 17th, or the anniversary of the East German uprising in 1953.

October 3rd replaced both days as the national day of celebration. 

Where can you celebrate it?

Unity Day is a national holiday with celebrations readily found around the country.

In Bavaria, Oktoberfest remains open until October 3rd partly to mark the occasion. In Berlin, festivities are readily found around the Brandenburg Gate.

However, each year, a major city plays host to official celebrations and the Unity Day Bürgerfest, or ‘Citizen’s Festival.’ The host city is in the federal state presiding over the Bundesrat – Germany’s upper legislative chamber – that particular year.

For 2022, Erfurt – the state capital of Thuringia – is the host, and next year will see Hamburg take over hosting duties.

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