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Business

What German Business Wants Post-Election

Business and the economics institutes agree that the German economy is in need of a major overhaul. But which of the governing coalitions now possible most conforms to their reform visions is a more difficult question.

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Employers' leader Dieter Hundt wants Jamaica in Germany

The latest Bundestag election showed just how wishy-washy the German electorate is about economic reforms. Back in May, a dissatisfaction among Germans with the reform policies of the Social Democratic Party (SPD) led Chancellor Gerhard Schröder to call for a premature election to support his course. But the election results show that neither the SPD with the Greens nor the black-yellow CDU and FDP have enough seats to govern. As a result, Germany is facing a clear stalemate for reforms.

Despite this ambiguity, business leaders and several of Germany's influential economics institutes have expressed preferences about the right coalition to push through the reforms. The most important thing, they say, is to set a clear sign for a break with the status quo.

A Mountain of Woes

As the president of the Confederation of German Employers' Associations, Dieter Hundt belongs to Germany's upper echelon of economic advisers. He leads one of the country's most powerful pro-business lobbying and interest groups. Though Hundt chooses not to explicitly name his preference for which party is most fit to lead Germany, he is unequivocal that Germany needs a change -- and fast -- to rescue it from a "mountain of woes."

To Hundt's chagrin, the mountain of woes has not gotten any smaller following the election. The party constellation looks to be no more able to bring change to Germany than before. This means that record unemployment, the dramatic budget deficit, the encumbering and costly bureaucracy, and the burdensome social security system won't be able to he helped anytime soon. Bad news for business, Hundt said.

"To all those who are now engaging in exploratory talks, I have some advice: In the last three years we experienced an economic downswing which must be stopped," he said. "Germany therefore needs a new political leadership that can actively create the necessary conditions for sustainable growth and for increased employment."

Jamaica or Grand?

Jamaika-Fahne vor Reichstag

What would Jamaica mean for Germany?

Given the possibilities, what do Germany's economic experts see as the best coalition? Hundt is reserved, saying only that there are more similarities between the CDU, FDP, and Greens than campaign rhetoric would have one think. In other words, he seems to prefer a Jamaica coalition. The other option for the pro-business community is the grand coalition between SPD and CDU. The traffic-light coalition of SPD, FDP and Greens or a minority government are highly unlikely.

Ulrich Blum, the president of the Halle Institute for Economic Research, is a proponent of the grand coalition -- for a limited time only.

"The best solution for Germany is a snappy grand coalition with a focused platform," he told the Ruhr Nachrichten newspaper.

After a few years, the grand coalition would have done all it could do. In the meanwhile, the Bundestag could amend the constitution in order to allow it to dissolve itself. Then a new election could once again offer German voters the chance to decide on the proper direction for Germany.

Blum said that whether Angela Merkel or Gerhard Schröder were to lead Germany was beside the point. The important thing, he said, was for Germany to have a stable and strong government.

The Jamaica coalition would not offer this, Blum said.

"It would be a coalition against the SPD," he said. "The essential breakthrough in the federalism reforms and voting laws reforms would sink into oblivion."

No time to lose

Michael Hüther, Director of the Cologne-based Institute of the German Economy, one of the country's most influential economic think tanks, made it very clear in Berlin on Wednesday that he supported a grand coalition. After presenting an overarching roadmap for economic reform, Hüther said that only a strong government would be up to the task.

Nordische Ski Weltmeisterschaft in Oberstdorf

Hüther recommends dancing with your coalition partner

"Some wise advice is: You have to dance with the girls that are at the fair," Hüther said, referring to the need for potential coalition partners to come together despite differences. "We have to live with the result of the election, and we need a strong government. Therefore, I have a strong preference for a grand coalition," he said.

Whether they prefer the Jamaica or the grand coalition, Germany's pro-business economic experts agree that more than anything else, what matters most is a speedy decision. Should the process be stretched over days and weeks, it would hurt Germany's growth prospects significantly, especially in the coming year.

"Politicians need to come to a decision soon," Hüther said. "We have no time to lose."

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