Is Germany on the brink of change?

800px-Brandenburger_Tor_abendsThe German election campaign will fire up when the country returns from its August break. Just as most Americans do not turn their attention to presidential elections until after Labor Day, most Germans have other things on their minds. So far, the campaign seems both boring and unpredictable at the same time, in part because of the complicated coalition arrangements which follow German elections.

Chancellor Angela Merkel’s Christian democrats lead the opposition social democrats by almost two to one. If Germans directly elected their chancellor, she would coast home with more than 60%, comparable to the re-election landslides of Ronald Reagan and Lyndon Johnson. But the chancellor is chosen by parliament, and Merkel’s party is unlikely to secure 50% of the seats. She will probably be obliged to form a coalition. Her preferred partner is the FDP, known as liberals, but in American terms, libertarians-lite. They support low taxes, free markets, and social liberalism. They are moderate in foreign affairs. But the FDP has crashed in popularity. Having secured a record 15% last time, and reclaiming its traditional third place, it has fallen to about 5% this time, and a probable fifth place. Worse, 5% is the hurdle a party must exceed to be represented in parliament. If the FDP qualifies it will re-form the current coalition, but it may be excluded from parliament altogether.

If the FDP fails to qualify, there is an outside chance that the Christian democrats will have an overall majority, though it is more probable that the three left wing parties – the social democrats, the greens and the left party – will have more than half the seats. They might be able to form a coalition, but the left party is a ragbag of former East German communists and defectors from the social democrats, whom nobody really trusts. Merkel might form a coalition with the environmentalist greens or re-form the “grand coalition” with the social democrats that she was forced into from 2005-09.

Merkel is a cautious operator, and has never implemented the one radical policy which she advocated in 2005 – a flat tax. In 2005, electoral arithmetic forced her into an unwanted coalition with her main rivals. In 2009, though she got her preferred coalition, the world economy was in a difficult and unpredictable state. It was probably not the time for radical experimentation. But could 2013 be the opportunity to pursue radicalism? Germany’s economy is growing, its public finances are strong and the overall debt is manageable. 

This is only realistic if the FDP – which has also advocated a flat tax in the past – secures election to parliament. This columnist’s fantasy is that the FDP makes a flat tax its signature policy, and secures a clear poll boost as a result. With both coalition parties committed, the policy could then go ahead.

The results would be far-reaching. France has recently adopted a stunning 75% top rate of income tax. High-earning French citizens are already fleeing. If next-door Germany was to adopt a flat tax – probably around 25% – the pressure on France, and other neighboring countries, would be become immense. 

The wave of deregulation, privatization and tax cuts which followed the elections of Margaret Thatcher and Ronald Reagan passed Germany by. West Germany had, after all, avoided the worst excesses of the inflationary seventies. Could Germany lead the revolution this time?

Quentin Langley is a Senior Lecturer in Marketing at the University of Bedfordshire Business School as well as a freelance columnist published in the UK and all parts of the US. He blogs on social media and crisis communications at brandjacknews.com

 

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