Sunday, September 18, 2005

Both main parties loses in German election-and rightly so

The latest German elections looks as if they are going to mean a election loss for both the Social Democrats and the Christian Democrats, which is likely to produce a "hung parliament" and political uncertainty. While there is a left-wing majority in Germany, Schröder have ruled out any talks with the crypto-communist Left Party which got 8%, so there will have to be some coalition that crosses the traditional left-wight divide.

Whatever will happen, two things are clear. First, this result is not good for Germany as the necessary reforms will be stalled (not that they would have been implemented if one of the two major parties won) Second the two major parties both lost and both deserved to do so as neither took the task of reforming the German economy seriously. The Social Democrats have proven themselves under their 7 year rule to be incapable of implementing the necessary reforms. The Christian Democrats did seem somewhat better if one were to believ their promises, but they screwed everything up by calling for an increase in the value added tax (consumption tax) to pay for their payroll tax cuts. As people knew they were not likely to be the beneficiaries of the payroll tax cuts, they knew this would likely result in their real wages would be further reduced.

Raising taxes is and should be a election losing position, so for the next time they should drop that idea and instead push for tax cuts financed by spending cuts.


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