A Coalition Agreement for the Holiday Season

With Christmas around the corner, who wants to think about cinching one's belt to reduce spending? We're much more inclined to think about Santa Claus, and the gifts he will bring. A little known variation of the Santa Claus legend involves a family that has frittered away its wealth. The father is desperate. Yet during the night he hears a quiet jingle. And in the morning, he finds a sack full of gold in the living room – Santa Claus was there! In designing their coalition agreement, the CDU and SPD were apparently motivated by similar festive sentiments and hopes. They've drafted a long wish list: increased pensions for retirees receiving minimal benefits, as well as for mothers, in addition to early retirement at 63. The eyes of the children light up at such generous promises, for they will be old one day too. Other items on the agenda include a universal minimum wage, rent price controls, and government intervention to keep electricity prices low. Municipalities are to receive more money, and more roads are to be built. In short, no one is to be short-changed when it comes to stuffing the Christmas stockings.

But who will pay for all these gifts? Only the miserly ask such questions on Christmas. But be careful! Santa Claus also has a reproachful side, and punishes those who have been bad. The parties to the new coalition have not forgotten this fact, and have been determined to fight criminality. Yet their wrath is not only directed at the usual suspects but also at companies. For example, there are plans to expand regulatory offence law in the private sector, as well as review the viability of new criminal law for multinational companies. But why focus on multinational companies, while overlooking domestic firms? And woe to all those who possess assets! Plans foresee easing the government's ability to seize ill-begotten gains, temporarily impound assets upon suspicion of crime, as well as confiscate assets retroactively. Indeed, anyone possessing assets will be burdened with proving they did not acquire them criminally. Clearly, white collar crime should be prosecuted, and recent examples of interest rate manipulation and corruption have demonstrated a need for action in this area. But we should avoid giving the impression that multinational companies and banks are under general suspicion of being criminal.

Of course, the holiday season would not be complete without New Year's resolutions, and the coalition agreement is not lacking in this regard. Growth in government expenditures is not to exceed GDP growth 'to the extent possible', the agreement affirms. While subsidies (both new and old) are not to be reduced right off the bat, they are to be reviewed. The SPD and CDU also want to strengthen the 'investment orientation' of the federal budget. Over the next ten years, the coalition hopes to reduce the Germany's debt-to-GDP ratio from 81 per cent to below 60 per cent (regardless of planned government giveaways). The buzzword at the moment is 'sustainable consolidation' of public debt. There has also been much talk of ensuring the ability of social insurance funds to meet future obligations. We would certainly have something to celebrate if these New Year's resolutions were fulfilled.

The holiday season, dear friends of ZEW, is a time for reflection and contemplation. Not everything contained in the coalition agreement is the product of celebratory over-exuberance. The good intentions are clear, but they are not very concrete. That is not enough, but better than nothing. I am confident that we – voters and politicians alike – will use the holiday season to recollect on whether everything we did over the past year was correct, where we are now, and what we need to do in the future. In this spirit I wish you a joyous holiday season and a prosperous new year.