Coalition Rivals Could Spell Trouble for the German Economy

“I wish you the best of luck.”

 These words were spoken by Gerhard Schröder, as he departed from his role as the Chancellor of Germany on Tuesday to make room for the newly elected Chancellor Angela Merkel.

 From the actual election results, it looks as though Merkel may need all the luck she can get.

 The vote showed that 51 deputies within Merkel’s Grand Coalition secretly voted against her. The opposition is expecting to see more of Merkel’s party defect, as well.

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 The Coalition, which came to be when the Christian Democrats and Social Democrats parties aligned their political agendas to achieve a majority in parliament, is still clearly divided, especially when it comes to some of the policy reforms that Merkel has up her sleeve, including:

 — Needing approximately US$41 billion in cuts and new revenue sources needed to bring budget deficit on par with the European Union’s 3% GDP cap

 — Increasing the VAT tax by 3% in 2007

 — Raising the retirement age to 67, with retirement benefits frozen for first four years of retirement

 — Ditching tax breaks on new home purchases and other tax incentive downgrades

 — Removing some job protection measures

 By looking at the above examples, you can see why some of these suggested reforms may not sit too well with some Coalition members.

 Merkel’s goals, on a basic level, are to ease unemployment and help remedy the deficit. However, some members of the opposition, and indeed some members of the Coalition itself, believe that the reforms currently being weighed could do more harm than good to the German economy.

 The vote “shows just how wobbly the foundation of this coalition really is… I don’t see how it [the Coalition] can last more than two years,” said Guido Westerwelle, an opposition party member.

 The long-time foes might just not be ready to trust each other… they do share the parliamentary majority, but old habits are hard to break, and it looks like Merkel has a hard road ahead of her trying to lead two very different groups down the same policy path. Hopefully, the future of the German economy won’t bear the brunt of their rivalry.