What German Parties Are Promising Ahead of September’s Election

(Bloomberg) -- Germany’s Sept. 26 election is fast approaching: here’s a look at some of the policies of the main parties, from taxes to housing and climate, to see what kind of coalition government might make most sense.

With Angela Merkel stepping aside it’s one of the most unpredictable national votes in decades. The Social Democrats, whose hopes lie with current Finance Minister Olaf Scholz, have mounted an unexpected comeback and are vying with the conservative bloc to lead Europe’s biggest economy. Scholz is more popular than Christian Democratic Union Chairman Armin Laschet, who is running for the conservatives and has mounted a gaffe-prone campaign that has dented support for the alliance.

The Greens, led by Annalena Baerbock, have also lost ground and are running third, ahead of the liberal Free Democrats, led by Christian Lindner, a potential kingmaker because the group could be needed to secure a parliamentary majority in a ruling coalition. Two other parties — the anti-capitalist Left party, and the far-right Alternative for Germany — are almost certain to remain in opposition.

Taxes

► The CDU and the CSU are ruling out tax increases and want to ease the burden on low- and middle-income earners, while scrapping a so-called solidarity levy originally introduced to finance the reconstruction of the former communist East. They also intend to cap taxes on corporate profit at 25%.

► By contrast, the Greens are proposing an increase in the personal top tax rate to 48% from 42%, as well as levies on capital gains and wealth. Manager remuneration would no longer be written off as an operating expense. Meanwhile, tech companies such as Google and Facebook would be subject to a digital tax. Overall tax cuts are rejected.

► The SPD is also eyeing tax increases, increasing levies for the rich, including by reinstating a wealth tax. But the party wants to offer relief for people with low and middle incomes. It sees no broad leeway for tax cuts.

► The FDP wants to cut taxes for companies and high earners, with an overall taxation level for companies no higher than the OECD average of around 25%. The party seeks a a top tax rate of 42%, in effect from incomes of 90,000 euros ($107,433). The FDP also wants a negative profit tax, to be paid out by tax authorities to companies to cover liquidity needs. The solidarity tax for the east should be scrapped.

Fiscal policy

► The CDU-led bloc aims for a quick return to a balanced budget and the re-imposition of the so-called debt brake, a limit on borrowing that’s enshrined in Germany’s constitution.

► The Greens want a 10-year investment program worth 500 billion euros, with Baerbock saying she’ll unleash government aid to compensate German industry for the transition costs to climate-neutrality. To finance the transformation, the party seeks to change the debt brake, which limits debt financing to 0.35% of GDP. The party wants investment to be treated as public assets, allowing the state to take on more debt while taking advantage of low interest rates.

► The SPD seeks to continue major investments with a looser approach to balancing budgets. The party has signaled a continuation of more generous spending after the pandemic without explicitly calling for a change to the debt brake.

► The FDP wants to reduce debt to 60% of economic output as soon as possible and calls for a “turbo repayment.” Budget policy should be strict, investment-oriented and in line with the debt brake. Unnecessary state shareholdings and all shares in companies that do not belong to public services of general interest have to be sold — especially government stakes in Deutsche Post and Deutsche Telekom.

Social policy

►  The CDU bloc says the retirement age for pensioners must not be lowered. The party wants to create a “generation pension” fund in which the state pays a certain amount per child.

► The Greens want to raise social aid by at least 50 euros per person. In the medium term, longer-term unemployment benefits should be replaced by a guaranteed security payment without conditions attached. The Greens seek an increase of minimum wage to 12 euros from the current 9.50 euros.

► The SPD wants longer-term unemployment aid to become a so-called citizen’s income. That means that property and assets should not disqualify recipients from entitlement in the first two years. The party wants the unemployment benefit to be paid out for a longer period, reversing a labor-market reform it introduced at the beginning of the last decade. The minimum wage should be raised to 12 euros.

► The FDP wants more centralized and standardized education in Germany, where the 16 states are responsible for education policy. Combining work and family life should be improved through tax incentives for company-based kindergartens. The legal right to childcare should be guaranteed after maternity leave.

Housing

► The  CDU/CSU aim for the construction of 1.5 million new apartments by 2025.

► The Greens want to introduce a rent cap for small businesses to limit prices in cities with a tight commercial market. Each person should be granted the right of housing within the country’s constitution. Rent controls should be introduced on a nation-wide scale.

►The SPD wants to limit rent increases in areas with housing shortages to be in line with inflation. The party also wants to reinforce existing measures to ease rent rises in urban areas.  

► To combat housing shortage, the FDP also wants to build more. The party says restrictions on rents ultimately lead to less living space and should be avoided. It calls for a tax-free allowance of 500,000 euros to buy homes as a personal living space.

Tech

► The CDU-led bloc focuses on promoting growth in the private sector, and proposes setting up a German or European stock exchange for home-grown technology startups. The party says Germany needs needs to cut red tape to compete with the likes of China and global tech companies such as Google, Amazon and Tesla.

► The Greens want to be able to break up internet giants that exploit market dominance. To encourage the creation of a wave of new companies, the party wants to offer a program to provide easy access to as much as 25,000 euros in seed funding. The program includes targeted support for women entrepreneurs. Also, startups would have better access to public tenders.

► The SPD seeks to increase spending on research and innovation to at east 3.5% of economic output and expand the availability of affordable credit to start-ups. 

► The FDP wants to significantly expand a fund for start-up financing, while calling for limits on state participation in companies.

Foreign Policy/Defense 

►  The CDU-led bloc is strongly committed to the trans-Atlantic alliance as well as NATO-led goal to spend 2% of economic output on defense. The EU must develop a unified strategy against the expansion of Chinese interests  and insistence on fair market competition. Russia’s challenge to European values must be countered and a new military threat prevented.

► The Greens seek an overhaul of NATO, claiming the alliance lacks a strategic perspective. The party also rejects the 2% defense-spending target. Germany’s trans-Atlantic partnership should be renewed and framed in European terms. The party is outspoken on Chinese rights violations in Xinjiang, Hong Kong and Tibet — and support dialog with Beijing only where China is willing to cooperate. The Greens explicitly call for a halt to the Nord Stream 2 pipeline that will ship gas from Russia to Germany under the Baltic Sea.

► The SPD seeks a more independent EU with respect to the U.S. — and doesn’t support the NATO 2% defense-spending goal. It calls for critical dialog with Beijing, while calling out Chinese rights abuses. The party also calls for constructive dialog with Moscow to defuse tensions and a prospect for scaling back EU sanctions if the Kremlin conforms to the Minsk agreement that aims to dial back conflict in eastern Ukraine.

► The FDP stands by the NATO target — and seeks to spend 3% of output on defense, development and diplomacy as a whole. The party is in favor of a clearer stance on Russia, calling for a moratorium on construction of Nord Stream 2 until Moscow backs an independent inquiry into the poisoning of jailed opposition leader Alexey Navalny and broader improvements in its human-rights record. Cooperation with China, a “systemic rival,” should move forward, but based on international law.

European Union

►  The CDU/CSU says the process of further European integration must continue. EU rules on fiscal policy enshrined in the Maastricht Treaty must be reinstated. The party broadly rejects joint debt and what it calls a “transfer union.”

► The Greens call for a completion of the EU’s banking union, including a bloc-wide guarantee for savings. More broadly, the EU should pursue a common fiscal policy to relieve the burden on the European Central Bank. The ECB, in turn, should promote growth and jobs as well as price stability. The EU’s bailout fund should also be developed into a European Monetary Fund, which will provide credit lines without conditions.

► The SPD wants to develop the bloc’s Stability and Growth Pact into a sustainability pact. Rejecting austerity policies of the past, the SPD wants to move forward with a common investment policy introduced by the Covid-triggered EU recovery fund, financed by joint debt. The EU must be given the capability for fiscal policy action and develop towards a genuine fiscal, economic and social union.

► The FDP calls for a full re-implementation of EU rules on debt and deficits after the pandemic recedes. The party supports a European Monetary Fund as a guardian for public finances. The liberals want a constitutional convention that would work toward a federally constituted EU. 

Climate

►  The CDU-led bloc supports climate protection in tandem with sustainable growth, with the help of a market-oriented emissions trading system. The conservatives aim for a carbon-neutral economy by 2045. 

►  The Greens aim for carbon neutrality in two decades. Only emissions-free cars should be registered from 2030, by which time coal-fired power plants will be phased out and the Greens hope short-haul flights will become superfluous — particularly with the expansion of rail travel. CO2 pricing should be raised to 60 euros a ton in two years, with citizens aided with a reduction in the so-called renewable energy surcharge levy and a disbursement of an energy bonus. The party wants to tie trade to climate. 

►The SDP seeks carbon neutrality for electricity production by 2040 ahead of a broader neutrality goal for 2045. Measures in place to reduce the country’s footprint should go hand-in-hand with job creation and support for communities facing job losses because of the energy shift. 

► The FDP wants to promote new technologies as a means to counter climate change. Emissions trading is to be expanded as quickly as possible and a CO2 limit set so that investments in cleaner technologies are worthwhile. Certification of climate-friendly synthetic fuel should be eased and a climate dividend should be introduced as an incentive scheme.

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