Praise and criticism
October 24, 2009
The agreement, finalized in the early hours of Saturday morning, come three weeks of bargaining and almost a month after Merkel's conservatives and the FDP won a parliamentary majority in federal elections.
The new coalition will look to extend the lifespans of nuclear power plants it judges safe, change banking supervision rules to give the Bundesbank greater powers and ensure continuity in foreign policy, according to the 128-page coalition agreement.
The centerpiece of the agreement is a plan to slash income taxes by 24 billion euros ($36 billion), in particular reducing the tax burden on families with children and reforms to corporate and inheritance tax.
The plans have met with praise from industry leaders but Germany's political opposition and environmental groups have slammed them as unrealistic and damaging.
Steinmeier: "False start"
The leading opposition party Social Democrats has slammed the coalition deal as a shift in the wrong direction. The Social Democrats were part of an uneasy "grand coalition" with Chancellor Angela Merkel's conservatives for the last four years.
Outgoing Foreign Minister and head of the Social Democrats' parliamentary group, Frank-Walter Steinmeier described the deal as a "grand false start." Steinmeier ran as Merkel's main challenger in the bid for the chancellery.
"Nothing will get better, but there will be less security and things will get a lot more expensive. This coalition will widen the social divisions in this country instead of fighting them," Steinmeier told newspaper Bild am Sonntag.
The head of the Social Democrats, Siegmar Gabriel criticized the coalition for embarking on a course against the common good with an unrealistic financial plan.
Several economists too have expressed scepticism about how the new government would finance its tax plans in light of the country's ballooning deficit as Germany struggles with its most severe recession since World War II.
The Left party accused the incoming government of failing to handle the costs of the economic crisis in a fair way. Party chief Gregor Gysi said Berlin was about to embark on a path of "privatizing social risks," with the majority shouldering the costs of the mistakes made by a few.
Criticism over pro-nuclear policy
The opposition Green Party has accused the incoming government of endangering social peace in Germany. "In terms of environment, transport, energy, and climate protections, the coalition agreement is a worst case scenario," the Greens' chief Claudia Roth said on Saturday.
Environment groups have equally condemned the deal which abandons earlier plans for Germany to scrap nuclear power by the year 2020.
Greenpeace described the coalition's plans as a "clear failure when it comes to protecting the environment." Allowing a longer life span to older nuclear plants is a "fatal sign" according to Greenpeace.
Berlin's decision to back genetically modified crops has also sparked an outcry among environmentalists.
Applause from industry and employers
German business and industry however, have applauded the new deal as a step in the right direction to help Germany fight its way out of the financial crisis.
The head of the confederation of German employers associations, Dieter Hundt, described it as a "good compass for the coming years," criticizing only that the coalition didn't go far enough in making employment regulations more flexible.
Hans-Peter Keil, president of the Federation of German industries, said the deal was going into the right direction but expressed disappointment that there hadn't been enough courage to push through further reforms. Especially research and innovation should have received more support, he said.
The German economy has been hard hit by the global economic crisis. The export driven economy received a massive stimulus package and several of the country's banks could only survive with substantial bail-out money from the government.
Business confidence has picked up but analysts still expect unemployment to rise over the next year.
ai/dpa/AFP/AP
Editor: Sonia Phalnikar