Friday October 15, 2021
Praise for traffic light exploratory paper
Economists hope for economic reforms
The result of the explorations arouses the hope of a modernization of the state and budget among top economists. The proposals for tax and investment policy are particularly popular. On one crucial point, however, the experts still see question marks.
Top economists see the exploratory paper by the SPD, Greens and FDP as good approaches for economic reforms in Germany. “Overall, this is a constructive compromise and a good overall package that was quickly and confidentially agreed,” said economist Jens Südekum from the Institute for Competition Economics at Heinrich Heine University in Düsseldorf. “All in all a good package,” tweeted Ifo President Clemens Fuest. He referred to the maintenance of the debt brake, the waiver of tax increases and the commitment to provide the necessary funds for public and private investment within the framework of the existing rules.
ING chief economist Carsten Brzeski spoke of a “promising start”. According to Südekum, all parties have been able to push through prestige economic projects: the SPD the minimum wage of twelve euros, the Green basic child benefits and citizens’ benefits, the FDP share pension. “Above this, a common narrative hovers with the term modernization, which is concretized through a number of smaller projects – such as the acceleration of planning processes,” said Südekum, who is also a member of the scientific advisory board of the Federal Ministry of Economics.
The experts put question marks behind the financial feasibility of the planned future investments. These should succeed without tax increases. In a number of places, relief is even planned, for example through favorable depreciation conditions for companies. It is true that climate-damaging subsidies and other unnecessary government expenditures are to be abolished. “But that won’t be enough in the foreseeable future,” said Südekum. “That is why the coalition will have to make maximum use of the flexibility of the debt brake.” In 2022, when the debt brake is still suspended, the traffic light will probably fill a large reserve that will be melted down in the following years.
DGB is also satisfied
At the same time, wherever possible, it will outsource public investments to special purpose vehicles that operate alongside the debt brake. Between the lines it can be clearly seen that an increase in inheritance tax could continue, because the coalition is only ruling out the “introduction of new taxes on property,” said Südekum. “It is not yet possible to say whether it will be a big success,” said ING chief economist Brzeski on the exploratory paper. “It is definitely a step in the right direction, although it remains to be seen what the details really look like and how the implementation then works.”
Employer President Rainer Dulger criticized the lack of reforms in the area of social security in the newspapers of the Funke media group. There was now a threat of “four more years of stagnation”. The digital association Bitkom expressed itself generally positively with a view to the announced digital awakening. Christian Miele, CEO of the Startup Association, also said: “A digital awakening for the state, more attractive rules for employee participation, a strengthening of startup financing with elements such as the future fund and easier access to data would bring Germany forward.”
The head of the German Federation of Trade Unions, Reiner Hoffmann, has recognized the exploratory results of the SPD, Greens and FDP as a “first substantial basis”. The negotiating partners agreed that there was a considerable need for investment, he explained – “but without specifying the areas in which investments should be made,” he added. The questions of financing remained completely open. For the trade unions it is important that the next federal government combines modernization and more justice, emphasized Hoffmann. The goals agreed in the exploratory paper – such as more collectively paid and co-determined work, a minimum wage of twelve euros, a pension that is enough to live on, and a reliable welfare state – would have to be implemented quickly. This also included better opportunities for education and training.