Key players

Listen to this article

00:00
00:00

Unemployment:

What the CDU would do:

- Increase VAT from 16 to 18 per cent. The resulting €16bn in extra tax revenue to be used to fund a cut in income-based social security contributions so as to lower labour costs and make hiring cheaper.

- Companies would be allowed to deviate from sector-wide wage and working-time agreements.

- Companies with fewer than 20 employees would be permitted to hire and fire workers more easily; legal protection against arbitrary dismissal relaxed in larger companies.

What the SPD would do:

- Intensify the fight against illegal employment.

- Maintain state-financed training and job-creation programmes of the Federal Labour Agency.

- Allow older jobseekers to draw higher unemployment contributions for longer.

- Raise income support benefits in east Germany to the higher western level.

Domestic demand and investment -

What the CDU would do:

- Encourage innovative investment by phasing-out subsidies to non-promising sectors.

- Lower bureaucratic hurdles to investment.

- Relax banking rules that make it hard for small businesses to get loans.

- Rule out fiscal boosts to consumption.

What the SPD would do:

- Up to €600 a year in home repair work by households could be deducted from income tax.

- Introduce a public investment programme for road, rail, and public buildings.

- Allow more scope for public-private partnerships.

The welfare state -

What the CDU would do:

- Health insurance: Members pay a flat contribution regardless of wage; reform to be partly funded by cuts in the Federal Labour Agency’s training and job-creation programmes that would free up €7bn.

- Nursing insurance: Introduce a scheme to evolve from pay-as-you go towards capitalisation.

- Pension insurance: Private and occupational schemes would be encouraged; families with children get a discount on contributions. The goal being stabilisation of current contribution levels. No increase in retirement age for the time being.

What the SPD would do:

- Health and nursing insurance: The “citizen’s insurance” model forces all Germans, including those currently enjoying an opt-out, to pay into the old scheme. Contributions would continue to be based on income, though the base is extended to new income sources hitherto exempted.

- Pension insurance: Private and occupational schemes would be encouraged; early retirement discouraged. No increase in retirement age for the time being.

- Companies would be encouraged to raise wages in order to boost contributions into the social security system.

Taxation -

What the CDU would do:

From 1/1/2006:

- Close tax loopholes to raise €3bn in extra revenues.

- Introduce tax on capital gains from sale of cross-shareholding by large companies that was abolished by the Schröder government to be restored.

From 1/1/2007:

- Cut lower and upper income tax rates from 15 to 12 per cent and 42 to 39 per cent respectively (fully financed by scrapping of tax discounts and subsidies).

- Headline corporate tax rate would be cut from 25 to 22 per cent.

- Broader tax reform to follow.

- Paul Kirchhof, Angela Merkel’s public finance expert in the campaign, has promised the “10-minute tax return”, a radical simplification of income and corporate tax from 2007.

What the SPD would do:

- Introduce a “tax on the rich” - a three-point income tax surcharge for those earning more than €250,000 a year - to generate €1.3bn in extra revenues.

- Headline corporate tax rate would fall from 25 to 19 per cent.

- Carry out broader reform of corporate tax later, possibly introducing a “dual tax system” with different rates for capital and labour.

- Intensify lobbying for corporate tax harmonisation in Europe.

Public finances -

What the CDU would do:

- Budget deficit would fall back below 3 per cent of GDP within four years (though Ms Merkel as said twice in interviews that it might have to do so by next year).

- Bring Germany’s profligate 16 Länder into line.

- Aim to achieve a balanced budget by 2013 - the end of a potential second Merkel term.

What the SPD would do:

- There would be no budget cuts as long as growth remains subdued, but goal of fiscal consolidation would remain.

Education -

What the CDU would do:

- Election programme underlines that schools and universities are the responsibility of federal states; a CDU-led government would be likely to back the introduction by federal states of student fees for undergraduate programmes.

What the SPD would do:

- Support for full-day schooling and national school standards.

- Oppose student fees for first degrees at university.

Research, development and innovation -

What the CDU would do:

- Plan to spend an extra €1bn on research and innovation, paid for by subsidy cuts.

- Support gene- and bio-technology.

What the SPD would do:

- Continue to focus on building elite universities

- Support business investment in research and development

National security -

What the CDU would do:

- Military would be deployed in Germany to deal with terrorist threats.

- Introduce a new co-ordination system between police and intelligence services.

- Create tougher measures against alleged Muslim extremists in Germany, including preventive detention of suspected terrorists.

What the SPD would do:

- Focus on Europe-wide coordination against terrorism and organised crime.

- Give financial support for campaigns against far-right extremism and anti-foreigner abuse.

- Otto Schily, Mr Schröder’s interior minister, has called for expanded powers for the Federal Criminal Office along the lines of those enjoyed by the US FBI; he wants to allow preventive detention but being opposed many in his party.

Foreign and Europe policy -

What the CDU would do:

- Seek to improve ties with the United States, more critical stance likely towards Russia and China.

- Favour a ‘privileged partnership’ for Turkey with the European Union instead of full membership, but would not block opening of talks in October.

- Maintain close ties in EU with France, but greater focus on relations with small EU states.

What the SPD would do:

- Retain focus on gaining a permanent seat on United Nations Security Council

- Support Turkey’s EU membership

- Back diplomacy, not military intervention, to persuade Iran to abandon nuclear ambitions

Energy -

What the CDU would do:

- Allow nuclear power stations to remain open longer

- Have fewer subsidies for renewable energy

What the SPD would do:

- Continue with phase out of nuclear power

- Retain subsidies for coal mining and for renewable energy sources

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.