November 29, 2013 6:28 pm

German business savages economic plans of proposed coalition

Angela Merkel©AP

Angela Merkel is facing a chorus of criticism from German business over her putative coalition’s economic plans.

Employers groups have been joining forces in accusing the proposed right-left coalition of spurning the opportunity to promote growth-boosting policies, backtracking on previous reforms and burdening the economy with pensions increases and a minimum wage.

“It may not be intentional but they have now cancelled out what has been agreed in recent years to ensure the permanent, solid financing of public pensions,” said Ingo Kramer, president of the BDA, the German Employers’ Union, in a newspaper interview on Friday.

Mr Kramer singled out for criticism the pensions increases for older mothers, which were boosted at the demand of Ms Merkel’s CDU/CSU. The total cost of these pensions – at E6.5bn to E8bn annually – would be E130bn by 2030, he said, speaking to the newspaper Frankfurter Allgemeine Zeitung.

That was more than the savings coming from the earlier hard-fought decision to raise the general retirement age over the next few years to 67, he said.

Mr Kramer also blasted as a “serious mistake” a move pushed by the centre-left SPD to allow workers with 45 years’ service to retire early, at 63. These measures, he claimed, would raise labour costs and cut the take-home pay of workers paying social security.

The pensions increases are a key element of the coalition agreement reached on Wednesday. Ms Merkel went into the talks in a commanding position having triumphed in the September election with 41 per cent of the vote.

But SPD leader Sigmar Gabriel, whose party won just 26 per cent, strengthened his hand by promising in advance that any coalition deal would be put to the vote of the SPD’s 473,000 members.

The coalition agreement seems to have gone down well with the public. According to a ZDF television poll, 82 per cent of voters approve of the planned minimum wage of E8.50 an hour, while 90 per cent back retirement at 63 for the long-serving and 86 per cent the boost to mothers’ pensions.

Only 16 per cent think these plans can be financed without higher debts and taxes – but with unemployment low and the export-driven economy doing well, voters seem ready to take a chance.

Wolfgang Schäuble, finance minister, defended the coalition plans in an interview with Die Welt newspaper, saying that the burden of the pensions increases was “very limited”.

But business leaders are furious that the welfare and labour reforms of the past decade may be compromised.

Eric Schweitzer, president of DIHK, the German chambers of commerce, was quoted in the media on Friday as saying that retirement at 63 sent the wrong signals at a time when “we all must work longer”. He added: “The coalition partners are gambling with their projects that high economic growth will lead to record new tax revenues. But this is not a foregone conclusion.”

On Thursday, Ulrich Grillo, president of the BDI, the largest German employers’ organisation, delivered an even tougher rebuke to Ms Merkel. “The coalition agreement is a wasted opportunity for Germany’s future. It is not a master plan for our country. The signal is stop instead of start.”

Mr Grillo said the deal imposed “new stress tests” on business and added that the minimum wage alone threatened “hundreds of thousands of jobs”.

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