Cover Story : The people who are making the new Germany…

The people who are making the new Germany…

 


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Out: Gerhard Schröder

Peer Steinbruck, finance minister (SPD): This 58-year-old bureaucrat-turned-right-wing Social Democratic politician has arguably the toughest job in Germany: putting the country’s finances back on track. He might—just—be the man for the job. As finance minister and prime minister of Germany’s most populous state, North Rhine Westphalia, he honed a reputation for fiscal rectitude. He also worked effectively with political opponents to cut practical, money-saving deals on state finances. An avid chess player, he’ll need to keep a keen eye on the maneuverings of the labor and economy ministries.

Frank Muentefering, vice chancellor and labor minister: Freeing up the labor markets is widely regarded as key to unleashing Germany’s economic potential. That agenda is in the hands of a man who earlier this year dubbed hedge funds as “locusts.” His abrupt resignation as SPD chairman almost scuppered the coalition talks. He will be Merkel’s deputy. Expect some fireworks on this beat.

Michael Glos, economic minister: For 10 years Glos has run the parliamentary party for the CSU, longtime allies of the CDU. He comes from an archetypal Mittelstand business background in Bavaria. Pro-reform, yes, but not at the expense of anything that cuts into the interests of a Catholic social constituency with strong ties to the land.

… And the people who are pulling the strings behind the scenes…

Matthias Platzeck: This 51-year-old biochemist replaced the edgy Muentefering as chairman of the SPD during the coalition talks. A highly regarded premier of the state of Brandenburg, Platzeck will be point man in keeping the moderate and left-wing elements of the party working in tandem. He might work some of that magic in the coalition, too: A former Green turned Social Democrat, he has since worked closely with the CDU in his hometown state.

Edmund Stoiber: Don’t forget this veteran conservative. He skulked out of the coalition talks and holds no formal government position, but his leadership of the CSU and his economic track record of “Lederhosen and Laptops” in his home state of Bavaria means he can make trouble from the wings if he chooses.

 

 

What the Coalition Plans to do
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In: Angela Merkel

Labor reform
A tentative step toward more flexible working patterns: Employers can extend the probationary period from six to 24 months. During this period workers can be fired without any comeback. But non-wage costs, the highest in the developed world, will only be slightly eased. Mitbestimmung, or worker representation on the board, is unchallenged, as are collective wage settlements. Michael Sommer, chairman of the DGB trade union federation, said the unions would not “accept any, I repeat any, changes to the collective bargaining system.”

Balancing the budget
Here’s where the fireworks have already started. To staunch the flood of red ink flooding Germany’s public sector balance sheet, the coalition wants to increase the VAT sales tax from 16% to 19% and the top rate of income tax to 42%. They are holding back the VAT rises to 2007, when payroll tax cuts may provide a consumption boost, but the move has shocked many conservatives, keen to keep their mantle as a low-tax party.

Pension and Health-care Reform
Citizens will now have to pay a little more toward their own pensions; when they are drawing them, they will have to pay higher health-care costs. The moves are marginal, say economists, but that doesn’t make them any more popular.

Constitutional Reform
The one that few people understand within Germany, let alone outside: Germany’s post-war constitution set up an elaborate system of checks and balances between states and the federal government, aiming to stymie any chance of a repeat of the 1930s. But what was once good has now become a burden. By more clearly allocating respective roles and powers, the new administration hopes to make real changes in, for example, Germany’s creaking education system.

 

 


Mark Lehane

 

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