BERLIN (Reuters) - German Chancellor Angela Merkel’s coalition may collapse because of new demands put to her conservatives from a new leftist Social Democrat (SPD) leadership chosen by party members on Saturday.
In coming weeks, both parties must decide how far they will compromise to preserve their governing alliance until a 2021 election. The new SPD leaders have threatened to quit government if the conservatives don’t agree to their demands, a move that could cause a snap election or a minority government.
Here is a list of the main contentious policies:
NEW SPD LEADERS WANT -
INVESTMENT: Massive investment in schools, infrastructure and digitalisation. Various figures have been mentioned, including 240 billion euros ($264.53 billion) for schools, roads, railways, and 100 billion euros for digitalisation.
DEBT: To pay for the investment, they want to drop Germany’s strict fiscal rules on borrowing and commitment to a balanced budget, saying this has become a fetish. Although the 2020 budget has been passed, they argue for a supplementary budget.
This would break a taboo for many conservatives. Even SPD Finance Minister Olaf Scholz, who lost the leadership contest, has so far stuck to fiscal rigour.
CLIMATE PROTECTION: More radical climate protection measures, including raising the price of CO2 emissions to 40 euros a tonne from 10 euros a tonne from 2021. That suggestion is in line with what many climate economists had advocated.
There may be some leeway on climate measures, also on the expansion of renewable energy, not least because a 50 billion euros package of measures agreed in September has got stuck in parliament and will have to be tweaked.
MINIMUM WAGE: To immediately increase the minimum wage to about 12 euros from just over 9 euros now.
Conservatives may be prepared to move towards the SPD but not as far or as fast as the new leaders want.
MERKEL’S CONSERVATIVES WANT -
CORPORATION TAX: Many conservatives want to reduce corporation tax, which is anathema to the new SPD leadership.
SOLIDARITY TAX: To fully abolish a “solidarity tax”, introduced after 1990 German reunification, mainly to support poorer eastern states. The government has already agreed to abolish it for 90% of taxpayers from 2021.
DEFENCE: Want to steadily increase spending on defence in the direction of the NATO target of 2% of GDP. This is low down the priority list for the new SPD leaders.
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Reporting by Madeline Chambers; Editing by Mark Heinrich