Germany: The Green Party′s economic plans | Business| Economy and finance news from a German perspective | DW | 21.04.2021
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Germany: The Green Party's economic plans

The Greens' poll lead over Chancellor Angela Merkel's conservatives is a pivotal moment in German politics. DW examines what it could mean for the economy if the party were to win power in September's election.

A solar power factory in Germany

A factory producing solar panels in Freiberg, Germany

Germany faces incredible headwinds in a post-COVID world. Whichever party wins September's federal election will be responsible for helping to reinvent Europe's economic powerhouse, whose industrial export model is at risk of becoming obsolete.

According to opinion polls, Germany's Green Party has taken a lead over Chancellor Merkel's conservatives, which if sustained, could see the Greens seize power from the center-right CDU/CSU alliance.

The surge in popularity has caused many to question whether a party, that has traditionally championed a single cause — the environment — can be pragmatic enough to rebuild Germany's economic base. DW unpicks what the Greens have pledged in their 137-page economic policy paper, published last month.

Watch video 02:22

Germany's Green Party: Focused on the general election

Reinventing Germany

The Green Party says it will revise Germany's so-called debt brake, which is enshrined in the Basic Law and prevents governments from taking on too much new debt. Although Merkel's administration has broken these rules to cover COVID-19-related costs, it has committed to return to a balanced budget by 2022.

The Greens, on the other hand, say the current low-interest environment is too good an opportunity to miss. New and cheap loans will allow a far bigger investment in the green economy, so the party has pledged to spend €500 billion ($600 billion) over the next decade on the "socio-ecological transformation" of the economy.

And it will need it. Two of Germany's biggest export markets — the United States and China — may not be such willing customers going forward. China is becoming increasingly self-reliant, while the US appears set on maintaining the protectionist policies enacted under former President Donald Trump.

The Greens' spending plans should help deal with the unprecedented headwinds caused by the transition to electromobility, which will dramatically increase the use of automation in vehicle production and could see up to 400,000 jobs lost in Germany alone over the next decade.

The Greens have promised that new jobs will be created through the energy and digital transitions, while a wealth tax and a 50% boost to welfare payments will help bridge inequality.

New venture capital funds will be created to promote research and development and support innovative startups, according to the economic policy paper.

But some analysts have cautioned that the Greens' mammoth spending plans will make German exports even less competitive, while many of its ideological positions — such as its opposition to the Nord Stream 2 gas pipeline — will set Germany up for fresh confrontation with the likes of Russian president Vladimir Putin.

Annalena Baerbock, Green Party chancellor candidate

Annalena Baerbock is the Green Party's chancellor candidate

Environment first

As you'd expect, the Greens want Germany to make a more ambitious commitment to tackling climate change and will seek to cut CO2 emissions by 70% instead of 55% by 2030. That will mean the carbon tax, introduced in January, will more than double by 2023, which is likely to hit businesses and drivers hard.

The party has also pledged to step up investments in renewable energy, not just in the electricity sector, while promising that low-income earners will see their utility bills reduced.

By 2030, a Greens government has pledged to allow only emission-free vehicles to be registered and will aim for short-haul flights to become superfluous. Instead, the party will seek to expand rail traffic significantly and promote more environmentally-friendly tourism.

Tax hikes proposed

The Greens say its ambitious spending program will also be paid for by a 1% wealth tax on assets over €2 million ($2.4 million).

The proposals suggest the party will also clamp down on some business expenses that can be offset against taxes. For example, often companies currently claim managers' salaries of more than €500,000 as tax-deductible expenses.

Income taxes will also rise for those earning more than €100,000, including a new highest rate of 48% for incomes over €250,000 — up from 42%, while those earning average salaries should see their taxes fall, the party says.

An electric car charging station

Only electric cars will be allowed to be registered by 2030 under the Greens' plans

Other Green Party economic pledges:

  • The statutory minimum wage will be hiked from €9.40 to €12.
  • Germany's two-tier health insurance system will be streamlined, and high-income earners who opt for private insurance may have to also pay towards the public health system.
  • A 2.5% cap on rent increases for domestic tenants.
  • The Harz IV welfare system will no longer sanction recipients for non-compliance of targets for seeking work.
  • Germany's new supply chain law will be toughened, obliging firms with more than 1,000 workers to comply with social and environmental standards at all stages of supply and production.
  • At least a third of positions on boards of publicly listed companies should be filled by women.
  • An expansion of the circular economy that encourages the repair and recycling of all products.
  • A right to work from home will be created, and workers will be able to cut their hours from 40 to 30.

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