After four months of political deadlock, Germany's main political parties finally agreed to form a coalition government, after the inconclusive elections that were held in September last year. Despite the breakthrough, there were no sound cheers to the country's economy and finance. Germany's industry and finance experts argue that the deal agreed by the country's main political parties are much worse than initially expected as they do not make the economy fit in years to come.
Why are economists and industry experts worried?
In the deal agreed by CDU/CSU and SPD, a lot of resources would be redistributed while ignoring to pump in money for important matters such as technology, an aspect that is of great interest to the economy of the country. To make things worse, the negotiators of the deal were not able to discuss and agree on matters to do with structural reforms and tax breaks, despite an economy that is booming. With no tax breaks, critics warned that Germany is placed at a disadvantaged position compared to countries with tax breaks.
The deal between the two parties was further criticized with many opponents arguing that the country's budget discipline that had been the hallmark of Angela Merkel's three governments would cease to survive, and for that reason, unwarranted government spending would soon follow. The CSU/CDU's position is to cut taxes in Germany, a move boldly opposed by the SPD, and for this reason, there are fears that the deal would not yield the desired effect for the country's economy and finance.
Would Germany revert to a spending spree?
With the two coalition parties expected to assume office soon, many critics argue that it is not long before Germany reverses back on a spending spree. In fact, the SPD has already stated that they want to increase taxes, especially for the wealthy while calling increased public spending in areas such as infrastructure, education, and healthcare. With the SPD getting the treasury ministry, the mode of spending is expected to change.