Contentious issues of the election in pictures.
Although voters tend to have a violent reaction to it, the conservative union bloc and a few Greens are talking about raising the value-added tax (VAT) from 16 to 18 percent. According to them, that would bring in desparately needed funds to bolster empty state coffers -- up to 32 billion euros ($38.5 billion). But some economists have raised warning flags. Some worry that it would dampen consumer spending, and shoppers is just what Germany needs right now. Others say that the tax hike would destroy some 500,000 jobs. It sounds as if that flies in the face of Angela Merkel's "jobs have priority" mantra. The SPD, for its part, has rejected such a hike, arguing that it's nothing more than income redistribution -- but from the less well-off to the bigger earners. That's plausible, since people with less money spend more of it on consumption.
Slashing Red Tape
Nobody likes bureaucratic red tape, so it's easy for politicians of all stripes to demand it be eliminated. Especially during an election campaign. But in Germany, tackling unnecessary bureaucracy has turned into exactly the thing it sought to eliminate: more paper shuffling. For example, the eastern state of Brandenburg set up a special committee to reduce bureaucracy which costs 400,000 euros a year. A law to reduce red tape is in the works. What's next, a Federal Agency for Bureaucracy Reduction? And last year whereas only 35 laws and 129 regulations were binned at the federal level, 195 laws and 473 regulations were added.
On the surface, the conservative health premium plan looks to make health care simpler. Every German adult, healthy or ill, young or old, rich or poor, must pay a fix amount of money into the statutory health care system. No exceptions, as is currently the case for civil servants or the self-employed, who have private health insurance. It sounds easy, but those who don't have enough money to pay the proposed monthly premium of 109 euros will receive help from the government. Now that doesn't seem like the optimal way to lessen bureaucracy if millions of people will be seeking subsidies from the health ministry. What the conservatives deem absolutely mandatory, however, is the separation of health care premiums from wage and salary earnings.
Many dream of a tidy house with a white-picket fence in the suburbs and Germans are no different. The government pays 6.5 billion euros to house builders and new home owners each year. At the same time, the state is forking out millions to tear down 300,000 apartments. Though home ownership is thought of as a good thing in many countries, in Germany many are against the subsidy. The center-left coalition government tried to nix it recently to help plug holes in the budget, but the conservative opposition balked in the upper house of parliament, which it controls. However, now it looks as if the Christian Democrats want to eliminate the "Eigenheimzulage" too -- but only after they win this fall's election.
It would tickle Homer Simpson pink. If the Union bloc has its way, he could be able to enjoy his donuts behind the security control room of a German nuclear plant far beyond 2020. That's because the conservatives want to scrap the nuclear plant shut-down plans of the current government and let the facilities run longer. German utility companies are certain to be just as pleased as the Simpson paterfamilias if the Green-led nuclear phaseout is revoked. The old nuclear plants hardly cost any money. But then there's the controversy over a permanent storage facility for the waste products. Of course, there's always someone or some country willing to act as a nuclear trash can.
On paper, German businesses pay the highest taxes in Europe -- 36 percent. But in reality most don't pay at that level at all. Due to creative accounting and the liberal use of tax loopholes, a rate somewhere under 12 percent is more the case. In 1999, the Social Democratic-Green governing coalition provided corporations more new methods to keep their tax bills low. Firms can offset new gains against old losses and they no longer pay any tax at all on capital gains. The left wing of the SPD would like to rescind that. The conservative Union bloc, however, wants to lower the nominal corporate tax rate. The SPD overall is pretty much keeping mum about possibly lowering corporate rate, which the corporate sector would very much like, since that doesn't fit in well with recent SPD tirades comparing capitalists to swarms of locusts.
Citizens' Health Insurance
The center-left coalition is proposing a reformed health care system similar to one which exists in Switzerland. Like the conservatives' wished-for health premium plan, every adult in Germany would pay into the system. Important would be the inclusion of those who can and do opt out of the current system -- the wealthy. Under the current two-tier health care system, the big-money earners can purchase coverage privately to get more benefits such as single rooms or better dental care. Bringing the rich into the health care fold naturally draws applause from the masses. To make the plan seem even more equal, interest on savings, capital gains and rental income would also be taxed for the health plan. And citizens' health insurance itself? Well, the model would look like the current one in that the amount each individual pays is dependent on his or her earnings.
When Social Democratic Party head Franz Münterfering suggested introducing a wealth tax, he seemed to be making sure his lefty bona fides were there for all to see. The call to tax the rich was a balm for the raw soul of his party's left wing and the man on the street. Do the well-off have reason to be shaking in their Gucci loafers? According to the plan, people who earn more than 250,000 euros ($300,000) a year should have a three-percent surcharge put on their tax bill. Those who earn between 55,000 euros ($66,000) and 250,000 euros would, on the other hand, get a three percent discount. It's supposed to bring in 1.7 billion euros that could be used for research and education. No one can be opposed to that, can they? Oh yes, there are plenty who are.
Germany's budget deficit is as deep as a well in Sahara. Just as the water level in the desert continues to sink, so do the finances of the world's third-largest economy. Federal, state and local governments are at least 1.5 trillion euros in the red. The conservative opposition blames Finance Minister Hans Eichel - who used to be known as 'Thrifty Hans'. But he points to his conservative predecessors' borrowing binges as well as the Christian Democrats' habit of blocking his plans for slashing government subsidies in the upper house. Germany, meanwhile, will breach the EU's deficit limit for the fourth year in a row in 2005.
Hartz IV Welfare Reforms
The former Volkswagen manager Peter Hartz once said he'd rather be named Leutheusser-Schnarrenberger since that would have made his life much easier. No one would have dared name anything after him then. But Hartz led a government commission recommending labor market reforms and his last name became synonymous for slashing benefits for long-term unemployed and unpopular government belt-tightening. Known as "Hartz IV", it set off massive public protests even though the policy is only a tiny part of Chancellor Gerhard Schröder's reform agenda. Forever associated with him, Hartz has had to withstand death threats and general widespread hatred.