Growth opportunities law dispute: The Union is digging out Merkel’s unfortunate blockade policy

In order to come to power, politicians like Markus Söder are fine with almost anything. Now, through the Federal Council, he is holding up tax relief for medium-sized businesses in order to save farmers from diesel subsidies. How does this fit with the constant demands to relieve companies?

Pretending to be willing to compromise without being willing to compromise has always been a political strategy. Angela Merkel used it more than 20 years ago in the struggle for Agenda 2010. The legislative package was actually to the taste of the CDU, but she did not begrudge Chancellor Gerhard Schröder and the SPD their success and blocked the project in the Federal Council.

The memory of this is coming back these days – because once again the Union is holding a law in the Bundesrat that – judging by its previous statements – it would have to wave through immediately. The Growth Opportunities Act was originally intended to relieve the economy of around seven billion euros, but a compromise proposal only provides for 3.2 billion euros. Nevertheless, it has been stuck in the Federal Council for many weeks. The Bavarian Prime Minister Markus Söder only wants to wave it through if the subsidies for agricultural diesel are not canceled.

Two decades ago, the states led by the CDU and CSU stopped the red-green Agenda 2010. These included interventions in social laws (Hartz IV), the renewal of the labor market and trade tax, reduction of subsidies and bringing forward the last stage of income tax relief by one year. Merkel remained tough – despite all the warnings from the CDU/CSU and FDP. After almost endless and sometimes undignified haggling, a compromise was reached on December 10, 2003.

The main thing is to harm Schröder

The overall result can be summarized as follows: Merkel and CSU leader Edmund Stoiber – flanked by Friedrich Merz – let it pass undiluted, which hurt Schröder because it was clear that he would annoy his own voters. The left wing of the SPD and trade unions stormed against the project, especially the Hartz IV laws and the tax reform, from which corporations benefited. The SPD promptly fell in the polls. Merkel’s strategy worked. In 2005, the Social Democrats lost the election to the state parliament of North Rhine-Westphalia, and a few months later the election to the Bundestag. The irony of history: As Chancellor, Merkel benefited from Schröder’s reforms for years.

The Union is now preparing to convert the state chamber into a show stage again. The sister parties – above all CSU leader Söder – are torpedoing urgently needed relief for the economy by making the withdrawal of the planned cancellation of the tax gift to farmers a condition for their approval of the Growth Opportunities Act. No federal state is expected to simply wave through government projects – after all, that’s what the Federal Council is there for. But the goal here is obvious. Söder’s heart for farmers suddenly beats louder because he has the head of the Free Voters, Hubert Aiwanger, breathing down his neck.

The middle class is urgently waiting for the law. 18 business associations jointly appealed to the Prime Minister to lift the blockade. “There is nothing less at stake than the rescue of the German middle class,” they explained. The project is associated with tax breaks for companies that are intended to bring billions in relief – despite everything, this is only a drop in the ocean given the high energy costs and the economic downturn.

Nevertheless, it is said everywhere in the economy: We are all waiting for the law because it is fundamentally a small ray of hope in difficult times. Söder is right when he says that “it doesn’t bring about a serious, major improvement”: “It’s ultimately just a law.” But stopping it in such a transparent manner is pointless. It is precisely the policy that the Union is constantly upsetting, especially the Greens: a clientele – particularly a very loud one – is being served, while the view of the big picture is lost. So that Söder can publicly show that farmers are his best friends and that he can play a role in federal politics, the middle class has to wait to see what happens next.

Sad tactics

The Union cannot bring it down because of the majority in the Federal Council. Important exculpatory regulations can also come into force retroactively, i.e. on January 1, 2024. Most countries – not just those led by the Union – have objections, the motives are different. Sometimes it’s about corrections and further financial relief. For others, the original seven billion euros were too much and they want to conserve their coffers. As I said: That’s what the mediation committee is there for.

However, the uncertainty caused by a long back and forth – actually the hallmark of the traffic light coalition – is only further increased. If you then consider how often the CDU and CSU emphasize the importance of psychology for the economy and explain that medium-sized businesses as the backbone of the German economy must be relieved, the tactics are all the sadder. The CDU – like Secretary General Carsten Linnemann – has previously described competition as “the most suitable instrument” to enable innovation, but not “to regulate, plan, subsidize”.

It also remains a mystery how the blockade will fit in with the twelve-point plan to stimulate the economy, which Merz and CSU regional group leader Alexander Dobrindt recently presented. Dobrindt had told “The traffic light is once again showing itself to be a discouraged and weak government. Our proposals to get out of the crisis are necessary to stop the traffic light downturn in Germany.” He may be right. But stopping relief and leaving the rest of the middle class hanging because of angry farmers who already receive a lot of subsidies cannot be the solution – and certainly not a signal that Germany wants to solve problems with the remaining common ground that still exists .

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