BERLIN (Reuters) – Three German parties agreed a roadmap to form a new German government on Friday that included no tax increases, the minimum wage, and commitments on infrastructure spending. Following are some economists’ assessments of the outline.
LARS FELD, DIRECTOR, WALTER EUCKEN INSTITUTE
“The outcome of the exploratory talks shows the parties’ enormous willingness to approach each other and to respect each other’s most important concerns.
“It seems that this coalition can work together in a spirit of trust. I’m particularly positive about the spirit of optimism in social policy.
“The massive additional investments planned by the coalition will require substantial increases in spending. A large part can be managed within the limits of the debt brake. Much depends, however, on how much the government allows itself to be seduced into subsidizing climate transition in industry.”
MARCEL FRATZSCHER, PRESIDENT, GERMAN INSTITUTE FOR ECONOMIC RESEARCH (DIW)
“The draft agreement is a promising first step as it contains many forward-looking measures and ambitious targets. It is characterized by a great balance between economic goals, social security and international responsibility.
“However, the devil is in the details. It must be clarified how the coalition can make the planned investments without tax increases or breaching the debt brake. The question of how to support private investment also needs to be answered.
The coalition negotiations will be about fleshing out these promises and avoiding lazy compromises.”
JOERG KRAEMER, MANAGER, COMMERZBANK
“As expected, each of the three parties focused on the policy areas that are important to them.
“It is still uncertain how the coalition will handle the planned investments without cutting social spending, raising taxes or softening the debt brake. The coalition talks will not be a walk in the park, especially since the free-market FDP ticks differently than the Greens and Social Democrats.”
JENS SUEDEKUM, ECONOMIST, HEINRICH HEINE UNIVERSITY IN DUESSELDORF
“This is a constructive compromise and a good overall package that was agreed on quickly during confidential talks.
“All parties were able to push through prestigious economic policy projects. The SPD gets the minimum wage of 12 euros, the Greens the basic child benefit and the citizen’s income, and the FDP the share pension.
“To finance investments and tax reliefs, the coalition wants to cut climate-damaging subsidies the government can do without. But that will not be enough in the foreseeable future. That’s why the coalition will have to make maximum use of the debt brake. It is not yet clear how it will do this.”
CARSTEN BRZESKI, CHIEF ECONOMIST, ING
“It’s too early to say if it will be a great success. It is definitely a step in the right direction. The paper is a clear attempt to include the footprint of all three parties and, in some cases, to bridge major ideological differences. A promising start.”
CLEMENS FUEST, PRESIDENT, GERMAN ECONOMIC RESEARCH INSTITUTE (IFO)
“The draft agreement contains the preservation of the debt brake, the commitment to provide funds for public and private investment within existing rules, and a spending review. No tax increases. Overall, a good package.”
(Reporting by Rene Wagner; Writing by Zuzanna Szymanska; Editing by Thomas Escritt)
