On September 22nd, a new parliament was elected. It has been the first parliament since the foundation of the Federal Republic of Germany without a liberal party. The FDP missed the five percent hurdle. The most likely outcome of the negotiations between the parties in parliament will be a Grand Coalition, formed by Chancellor Angela Merkel’s Party and the SPD, the Social Democrats.
Angela Merkel was often blamed for changing Christian Democrats into a second social democratic party. She rejected every cut in the budget and the policy of tax reform which the FDP demanded. The “success” of balancing the budget was the consequence of a positive development on the labor market. This positive development was based on the reforms of the labor market which her predecessor Gerhard Schröder implemented. In her term as Chancellor, no action has been taken to reform the health care system and the pension system, although German population is in a process of fast demographic transformation. Her politics was a politics of status quo.
So, it is very likely that the Social Democrats will have a strong influence on the agenda of the new government. The introduction of the minimum wage of 8.50 euros for a working hour was set as a condition for an agreement between the two parties by the Social Democrats. An increase in social spending for the retired and families is planned, although nobody knows where the money should come from.
Germany is thus in a strange position: it is putting pressure on other countries to cut their budgets and take actions to implement necessary reforms, but itself will do the opposite. If this policy continues, it is likely that the success of past reforms will not last in the future. Maybe a time will come when also the “German miracle” on the labor market will be over.
