German government plans sweeping social attacks

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German government plans sweeping social attacks
By Peter Schwarz
21 November 2009

The new German government held a two-day cabinet conference Tuesday
and Wednesday at Schloss Merseburg in Brandenburg. According to
Chancellor Angela Merkel of the Christian Democratic Union (CDU), the
meeting was meant to create “a comradely atmosphere in which we can
resolve problems in a spirit of mutual trust.”

The meeting was prompted by the open emergence of differences within
the governing coalition during the new regime’s first two weeks in
office—over tax policy, public health policy and other issues. The
disputes arose between the coalition partners—the CDU, the Christian
Social Union (CSU) and the Free Democratic Party (FDP).

The direction in which the government is now heading is much clearer
after the meeting at Schloss Merseburg. Financial policy decisions
were taken that will lead to an unparalleled level of social
devastation, beginning at the latest two years from now.

The government is still keeping most of its intentions under wraps,
giving out no information about forthcoming budget cuts and delegating
the issue of health “reforms” to an inter-ministerial working group,
which is to present its proposals next year. The controversial issue
of extending the life of Germany’s atomic power plants was also
postponed to next year, primarily for tactical reasons.

On the one hand, the government fears the public reaction if it puts
all its cards on the table. Above all, it does not want to place in
jeopardy next year’s state elections in North Rhine Westphalia. If the
CDU/CSU-FDP coalition loses power in the country’s most densely
populated state, it will lose its present majority in the Bundesrat
(the upper house of parliament).

On the other hand, the chancellor wants to secure support for the
impending social attacks from the trade unions and the opposition
parties. In order to gain “the consent of all social forces for more
employment,” she invited the union leaders, together with the
employers’ associations and banks, to a crisis summit in Berlin in
early December.

In pro-business circles, “more employment” is a codeword for the
dismantling of workers’ rights and the slashing of wages. Since the
election, union leaders have demonstrated their readiness to cooperate
closely with the new government on these questions.

Among the nominal opposition parties, the Greens are the pioneers when
it comes to cutting public expenditure, and Merkel can count on their
support. Since they have already joined CDU-led state governments in
Hamburg and Saarland, discussions have begun in North Rhine Westphalia
as to whether the Greens will help ensure that the CDU remains in
power in that state legislature.

As for the Social Democratic Party (SPD) and the Left Party, they
recently signed a coalition agreement in Brandenburg, at the centre of
which is the dismantling of 20 percent of public service jobs. State
Premier Matthias Platzeck (SPD) justified this by saying that by 2019
Brandenburg’s budget will decline by 25 percent from its current
level. In this respect, he is to a certain extent anticipating the
policies of the federal government. His finance minister, responsible
for proposing the cuts, is a member of the Left Party.

It is in this context that the central message emanating from Schloss
Merseburg should be seen. Federal Minister of Finance Wolfgang
Schäuble (CDU) and Economics Minister Rainer Brüderle (FDP) made a
demonstrative show of unity before the press, announcing that taxes
would be lowered, the European Union deficit criteria would be upheld,
and the brake applied to federal debt, as enshrined last summer in the
federal constitution. In 2011, taxes are to be reduced by around 20
billion euros and new graduated rates will replace the present
progressive taxation system. In the same year, the budget deficit will
be substantially reduced in order to reduce the federal debt.

It is clear what this means. Pointing to the exploding deficit, the
government will cut public expenditure to an extent that has never
before been witnessed, hitting government subsidies to both the
pension fund and education spending. New and even greater gaps will
arise in the coffers of the state legislatures and municipalities,
which are already strapped for cash, leading to higher charges for
services.

Economist Peter Bofinger commented in the Passaue Neue Presse: “I fear
that a narrow gauge federal government is intentionally being brought
about here. The first step was to agree to put the brake on the
federal debt. Now taxes are to be massively lowered. The result will
be to force a brutal cut in expenditure starting from 2011. Then the
crowbar will be taken to all government spending.”

Bofinger is member of the Council of Economic Experts. According to
his calculations, the annual budgetary deficit will rise to 100
billion euros if the announced tax reductions come into force.
However, the federal deficit must be lowered to 10 billion euros by
2016 in order to meet the legal requirement for reining in the federal
debt. “Nobody in the federal government is saying how cuts of 30, 40,
50 billion euros can be implemented. But this is what is threatened in
the coming years,” Bofinger concluded.

One item will surely remain exempt from cuts—the defence budget. The
cabinet conference broke off its deliberations for one hour in order
to agree to the extension of Armed Forces missions in Afghanistan and
the Horn of Africa and off the Lebanese coast. The upper limit for
Germany’s troop deployment in Afghanistan remains 4,500, but this may
be raised following the international conference on Afghanistan at the
beginning of next year.

The meeting in Schloss Merseburg has set the stage for a sweeping
redistribution of income and wealth from those at the bottom of
society to those at the top. The social divisions that have been
growing for years will be widened. While the government is striving
might and main to conceal this from the public, those occupying the
executive suites at banks and corporations have long since gotten the
message.

According to a report in the business daily Handelsblatt, the thirty
largest German companies listed on the DAX exchange plan to disburse
20.3 billion euros in dividends to their shareholders this year,
despite falling profits. This amounts to approximately 71 percent of
their net profits. In the previous record year of 2007, they paid out
45 percent of their profits.

While the government is lowering taxes, saying business needs more
capital to invest, the large corporations are doling out these funds
to their shareholders. The planned dividend payout by the
DAX-registered corporations corresponds almost exactly to the planned
tax reduction of 20 billion euros.

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http://www.wsws.org/articles/2009/nov2009/germ-n21.shtml

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