Sunday, May 29, 2005

Playing the tax game cites an article of the "Bild am Sonntag" in which it is reported that after early federal elections this fall the value added tax will rise in order to balance out revenue shortcomings. According to the article leading politicians by the CDU AND the SPD agree that value added tax needs to rise, and they suggest an increase by 4%, from 16 to 20%.

I think - bad idea. Germany's economic problems are largely due to a low domestic demand. People are saving their money for a better day. With increased value added tax, prices for every day life will rise, every shopping trip will end up more expensive. This will lead people to by less than more. This means, domestic demand will decrease further. Investments will be delayed. This will of course affect then businesses more that are dependent on the domestic market, but not so much the larger "global players" who sell their products abroad as well.
If additionally CDU plans would be implemented, where workers protection is decreased, the standard citizen will feel more uncertain about their personal future. More uncertainty - less consumption. People will save the little money have for the future - they may need it as an emergency fund.
The German economy on the other hand needs domestic demand, needs consumer confidence. The growth generated based on export is not strong enough to have labor market effects. So if you kill consumer confidence, you will increase the problems for the German economy.

Furthermore, an increase of the value added tax is unsocial and more likely to widen the gap between rich and poor. As a flat tax an increase of the value added tax will affect the poor more than the rich. For someone who earns only 900 euros, an increase in food purchases from 200 to 208 euros hurts more than for someone who has twice or three times as much money.
The CDU, from the little that is known about their concepts, also plans some other measures that will cost the normal citizen (employees) more. There is the possible introduction of tuition, there is the possibility of introduction of student loans with interest rates in order to replace the current Bafoeg model. This will in the long run make it harder for poorer people to afford an education.

I also see an increase of value added tax critical for the general trust in politics. If an increased value added tax is coming anyways, it might as well come now. It shows, just like in the last federal elections that the two large parties, while pretending to be different and having the better solution, actually have very similar concepts. So what's all the finger pointing and mudslinging about?

Of course, all of these concepts and plans are just that right now: concepts and plans. Nothing is set in stone. The news may be false. So one will have to keep the eyes open of what is happening. However, so far, I don't like what I see.

Friday, May 27, 2005

An east German chancellor - successful integration of East Germans into the political elite?

According to an MDR article some CDU and FDP members publicly debate whether or not the next Minister for the "Aufbau Ost" really needs to be an East German, or if the job could be done by a West German as well. It appears that many of the (east German) CDU members (Vaatz, Milbradt), but also Georg Milbradt, Saxony's prime minister and FDP member Cornelia Pieper don't seem to think this would be necessary. The key quote comes from former prime minister of Saxony-Anhalt, Christoph Bergner saying that if we had an East German chancellor, we don't need an East quota anymore.

I am concerned. No, I don't think it necessarily needs to be an East German holding that specific ministry post. What concerns me is, that this is the ONLY cabinet post currently occupied by an East German. Would Merkel be the ONLY East German in the next cabinet?

The number of cabinet posts held by East Germans has gone down over the years. While the first post-unification cabinet had 4 East German ministers, the current one has one - the one for Aufbau Ost, traffic and construction, occupied by Manfred Stolpe.

But also in other areas of the political elite, representation of East Germans is low. The number of East Germans chairing committees in the Bundestag is currently at an all time low. Only two East Germans, both FDP members, chair committees. Neither one of the two (Guttmacher and Pieper) held the post from the beginning of the current legislative period. Guttmacher got the chair position for the Petitions committe last year, two years into the legislative period. Pieper needed to trade in her post as general secreatary of the FDP in order to become chair of the Education committee in January of this year. (I doubt, that this expertise will land her in a possible CDU-FDP coalition the job as education minister, as her ideas on education policy go strongly against the FDP party line).

Another major concern I would have with Merkel being the only East German in a CDU-FDP cabinett, is that she would continue to shape the image of East Germans as competent politicians. Stolpe's popularity has declined over the years of him being minister for the Aufbau Ost. He is largely considered incompetent. And there are media reports suggesting that the only reason why he hasn't been replaced yet is that he is the ONLY East German in the cabinett.

Merkel would be shaping the image of East Germans as politicians and leaders as well. I doubt however, she has the key to solve the problems Germany is having. If she fails - will this block East Germans from getting top positions in the "nearer future" (2009, 2013)?
Many voters already seem to have concerns about Merkel's possible candidacy. Hearing reports from friends, I understand that one of the reasons not to vote for Merkel is that she is East German.

BTW, while I am disappointed that the above mentioned members of the CDU and FDP think the East German quota is fulfilled if Merkel becomes chancellor, I am not too surprised: it appears, that members of the CDU tend to identify more as Germans than as East Germans than their peers from the SPD or even the PDS.

Tuesday, May 24, 2005

The race for the Bundestag has begun

In a “surprise attack” chancellor Schroeder announced he and his party (at least those knowing about this) will try for early federal elections in the fall. This decision followed the loss of the election in North Rhine Westphalia, a traditional SPD state, governed by the SPD for almost four decades.

If this happens, this is going to be an exciting summer for me. I get to see a new campaign. How is voter behavior shaping up? What is gonna be the outcome of a new election? Will Schroeder achieve what he wants with this move – an early third term, or will Germany see a new coalition in power in December? Will Germany have a FEMALE EAST GERMAN chancellor?

Well first of all, the whole move by the SPD may look like political hara-kiri. They are trailing way behind the CDU in the current polls and the Greens have serious problems after the visa-scandal around Joschka Fischer. Their results in the polls and Joschka Fischer’s image are way down. So why do this? Why not wait until next year, hope that the Greens recover from the scandal, hope that the economy shows some progress and maybe hope that Germany wins or at least performs well on the soccer championship in Germany in 2006 (Schroeder as a soccer fan would most likely be able to get more sympathy points for that over his most likely opponent Angela Merkel).

The situation for him isn’t that great right now. The CDU is strengthened in the Bundesrat, his own coalition not as united as it needs to be in order to push for more economic reforms. Being blocked by the opposition and being passive is not Schroeder’s style. He is the man who tries to sell himself as the one who does things. Have mud flung at him and hoping for things that may never come (after all, the economic situation may not get better, the Greens might not recover and Germany could loose out in the qualifying rounds) is a too passive and too risky move. Furthermore it may worsen the conflicts within the SPD (between the left wing and the reformist wing) and then leave the SPD defeated and divided in the opposition. This surprise attack gives Schroeder the chance to get the party behind him, get them up and running, stop the bickering.

Furthermore it gives him a bit of an advantage over the CDU/CSU. The CDU/CSU is not united. They haven’t solved the so called “K-frage” (the nomination for chancellor). They haven’t thought out a clear program, new concepts. Will they self-destruct? Will they bicker internally over who will represent them in the campaign? Will they be able to get concepts together that are clear and convincing and superior to the Agenda 2010 proposed by Schroeder? Ruettgers, the newly elected prime minister of the state of North Rhine Westphalia from the CDU surely was able to dip into the SPD voter clientele by getting workers to vote for him. Will this work on the federal level?

Another interesting question is what kind of issues will be important in the election? According to DW-TV, the SPD plans to focus on the economy and foreign policy. The economy is unavoidable. It is on the minds of the people, they need to show competence there, even though things are not going well at the moment. If they weren’t picking this issue, the CDU would force it on them. The SPD needs a way to frame this issue themselves (and catching the CDU off guard might give them that little advantage).
Choosing foreign policy is an interesting move. I have the feeling the SPD tries a similar thing that worked in the last election: feeding off the unpopularity of George Bush. Big stretch you think? George Bush is not popular among the German population. However, Angela Merkel has supported Bush’s position. It is possible that the SPD tries to feed off this move and exploit it to their advantage. Claudia Roth from the junior partner the Greens made a similar reference this morning already. Another thing: the anti-war stance of the SPD might have mobilized some PDS voters to vote for the SPD (the lesser evil) in the last election. Trying to dip into that resource again?

What else? Education? Health Care? CDU/ CSU is internally divided on the latter and blocking some reforms in the Education area (junior professorship). Another thing is that most CDU-led states support the introduction of tuition for studies. The SPD doesn’t. Another way for the SPD to mobilize the younger voters?

I am very interested to see what is happening in the East this time around. The 2002 election was won in the East. With many East Germans not being clearly aligned with one of the traditional parties, their votes are up for grabs. Will they vote SPD again (voting for the lesser evil), will Angela Merkel be able to mobilize East Germans to vote for her, because she is an East German (an argument that could totally backfire in the West in turn). East Germans are more likely to vote for Angela Merkel than West Germans are. One reason for West Germans not to vote for her could be perceived incompetence. Angela Merkel does not have a positive image. Another reason is – she is a female. Is Germany ready for a female leader? DW-TV did a few street interviews in Munich, the CSU heartland. There one guy said he’d leave Germany when Angela Merkel becomes chancellor. Another said he’d prefer a man as a leader in these hard times Germany is facing. On the other hand, others were quite open to the idea of having a female chancellor and also said someone from the new laender (East Germany) would be desirable.

How will the PDS perform? So far I haven’t heard anything from that party. Latest polls have the PDS between 4% and 5% nationally and at 22.3% in the East (they got 16.9% from East German voters in 2002, but their support had dropped to that from 23% only in the last 4 weeks before the 2002 elections). What will their strategy be? Will they try to go after unhappy left SPD voters in the West and will they be able to mobilize them? What would a PDS entry to the Bundestag mean? How does that affect coalition making? Let the CDU support drop by 4% (to 40) and the FDP stay at their 8% - we have 48% for CDU/CSU and FDP. If the SPD gets 4%(from the current 28.6) more, the Greens 10% (currently at 9.8) and the PDS 6% nationally – this camp has about 48% then too. What coalition will we see? Possibly even a grand one? Or a red-green-pink one? Red-Green and yellow?

Can the SPD get the 4% more? It is possible. In 2002 they had in May 33.2%, by September they had 38.5% However, the CDU had remained fairly stable in their poll results from May 2002 to September 2002, peaking in August at 40%. The increased SPD support came at the expense of the PDS back then. I am doubtful they can dip into that reservoir again like they did then. East Germans (or a substantial amount of the voters there) might not trust either one of the big parties this time around and vote PDS. After all the PDS is stronger in some laender governments than the SPD (Saxony, Thuringia). On the other hand, the PDS does not have a strong identification figure at the moment, like Gregor Gysi was. Not being able to actively participate on the federal level has left them with very little to show for on the national level. All they can bank on right now is how they participate in the East German laender and in some cities.

So here are a bunch of questions (and I could raise more…). I am curious to see how the answers unfold over the next months. The race has begun.