👀 Copy Legendary Investors' Portfolios in One ClickCopy For Free

Explainer-Which German coalition plans will still be implemented?

Published 12/16/2024, 01:05 AM
Updated 12/16/2024, 01:12 AM
© Reuters. FILE PHOTO: German Chancellor Olaf Scholz speaks to reporters, after a December 16 confidence vote request was submitted, in Berlin, Germany December 11, 2024. REUTERS/Liesa Johannssen/File Photo

By Maria Martinez

BERLIN (Reuters) - Germany's political parties haven't agreed on much since Chancellor Olaf Scholz's coalition collapsed in November, but some laws could still be passed before an early election in February.

The departure from the coalition of the neoliberal Free Democrats (FDP) deprived Scholz's government of its parliamentary majority and left in limbo dozens of laws the coalition had been scheduled to pass in its remaining time.

However, the FDP signalled on Friday its support for passing certain laws that were already well advanced through the legislative process and in which the party was deeply involved.

Scholz will hold a vote of confidence on Monday and he has urged lawmakers to work together in the remaining window before the election expected on Feb. 23 to pass measures still on the agenda.

WHICH LAWS COULD BE PASSED THIS WEEK?

The parties in the old coalition - the SPD, Greens and FDP - reached an agreement on Friday to deliver income tax relief and higher child benefits.

According to a draft bill, the agreement will result in tax relief of more than 11 billion euros ($11.6 billion) for 2025 and 2026. Child benefit payments will increase by five euros to 255 euros per month.

Another possible survivor is the Deutschlandticket, a signature policy of Scholz's government which gives unlimited travel on local and regional transport for a monthly flat rate of 58 euros for next year.

Though popular with voters, its 1.5 billion euro price tag needs to be approved for next year. Conservative leader Friedrich Merz said he would clear the way for it.

Measures to strengthen Germany's constitutional court are also likely to be approved with the support of the three former coalition partners and the conservatives.

The court could be vulnerable if populist parties on the right and left win a third of the seats in parliament after the election, which would allow them to block appointments of new judges indefinitely, leading to case backlogs.

WHICH LAWS WILL FALL BY THE WAYSIDE?

A law that would promote the building of hydrogen-ready power stations was set to be sent to regional governments for consultation when the coalition collapsed. Though the extra capacity is urgently needed to complement wind and solar power, ministers do not believe there is time to get it through parliament.

There is also no time to pass the 2025 budget, new German Finance Minister Joerg Kukies said after the coalition's collapse. However, the draft budget prepared by the old coalition before the summer will be the basis for a provisional 2025 budget to tide things over until a new government passes a definitive budget.

While the cabinet decided to extend a rent freeze until 2029, Merz announced that his party would not support it in parliament because the current freeze is valid until the end of 2025.

Scholz's proposal to reduce the VAT rate on food from 7% to 5% is also considered to have no chance of success, with both the conservatives and the FDP criticizing the plan as an election campaign manoeuvre.

Germany's cabinet approved a pension reform in September but Scholz's plans for a guaranteed minimum pension of 48% of the average wage are unlikely to get the required support to pass parliament.

© Reuters. FILE PHOTO: German Chancellor Olaf Scholz speaks to reporters, after a December 16 confidence vote request was submitted, in Berlin, Germany December 11, 2024. REUTERS/Liesa Johannssen/File Photo

The chancellor's plans to cap the costs of electricity transmission at 3 cents per kilowatt hour and partly finance the costs of the transmission grids also lack opposition support.

($1 = 0.9516 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.