Economic Advisor Critiques Coalition Decisions as Questionable

The recent gathering of coalition leaders from CDU, CSU, and SPD resulted in a proposed immediate program aimed at bolstering the economy. However, the specific timeline for many initiatives remains ambiguous. Chancellor Friedrich Merz emphasized the need to address the country's structural growth weaknesses during the coalition meeting.

Veronika Grimm, an economic advisor, has voiced significant concerns regarding certain decisions made during the summit. She described several of the proposed measures as questionable, including the reduction of the VAT rate in the hospitality sector, subsidies for agricultural diesel, and the maternal pension increase. According to Grimm, these initiatives appear to be financially burdensome at a time when such expenditures are unwarranted.

Grimm also expressed perplexity over the extension of the rent cap, arguing that it undermines political credibility regarding temporary measures and could negatively impact private housing investments. Furthermore, she indicated that the coalition failed to adequately scrutinize the European supply chain law, suggesting a more rigorous approach to regulatory reform is necessary.

She underscored the urgency of establishing a commission to reform pension and nursing care systems, rather than focusing solely on the debt brake reform. Grimm proposed that linking the retirement age to life expectancy, adjusting current pensions according to inflation, and reinstating the sustainability factor are critical actions needed without delay.

Conversely, Grimm welcomed the decision to lower the electricity tax and reduce the financial burden on businesses, stating that the country has been grappling with a prolonged structural crisis. She highlighted the necessity for measures that improve the overall regulatory framework, arguing that merely reducing bureaucracy is insufficient.

The industrial union IG Metall has called for prompt action to implement the coalition's plans. IG Metall Chairperson Christiane Benner stressed the importance of swiftly translating these initiatives into tangible benefits for citizens and businesses, especially with limited time remaining before summer.

Benner referred to the coalition's decisions as a 'starting signal', noting that many of the measures long advocated by IG Metall, such as expedited investments in hydrogen, wind energy, and thermal technologies, have been included. She particularly praised the anticipated strengthening of wage agreements through the Tariff Loyalty Act, which aims to ensure fair compensation for workers.

Similarly, Stefan Wolf, president of the Gesamtmetall employer association, expressed satisfaction with the coalition's agreements on citizen and business relief. He emphasized the importance of swift implementation, asserting that every day the measures are delayed represents a loss for the economy.

Wolf acknowledged that the challenges facing the economy will not be resolved overnight but emphasized that the agreed-upon steps should not be underestimated. He highlighted the potential for a positive economic shift through the planned reduction in electricity prices and the introduction of special allowances for investments.

The BVMW, representing small and medium-sized enterprises, also urged for a rapid rollout of the new reforms, expressing concern for many businesses currently facing financial difficulties. They emphasized the urgency of implementing the coalition's decisions as global competition continues unabated.