April 29 (Bloomberg) -- Germany’s Greens party backed a campaign platform of tax increases that members of Chancellor Angela Merkel’s Christian Democratic bloc said rules out a coalition after national elections in September.
Delegates at a Greens party convention in Berlin yesterday voted through plans to raise the top rate of income tax to 49 percent for those earning 80,000 euros ($104,000) a year or more, and to 45 percent from 42 percent above 60,000 euros. They also backed a “wealth levy” on the richest to pay down 100 billion euros of Germany’s state debt over 10 years.
The platform “is a fiscal policy from the Stone Age,” Ralph Brinkhaus, a parliamentary finance spokesman for Merkel’s Christian Democratic Union, said by phone. It would harm Germany’s economy, and “whoever espouses this doesn’t belong in government,” he said.
Less than five months before federal elections that will determine whether Merkel wins a third term, the Greens manifesto distances the party from Merkel’s bloc and aligns with the policies of the main opposition Social Democrats. Germany’s best-selling Bild newspaper, which frequently channels the government, floated a potential coalition between Merkel and the Greens last week, saying in an op-ed that it would be “new, exciting and, if it came to it, worth a serious go.”
Polls add credence to the potential for an alliance. While support for Merkel’s CDU-led bloc gained one percentage point to 40 percent in a weekly Emnid poll published yesterday, her Free Democratic Party coalition partner dropped to 4 percent, below the 5 percent threshold to win seats in parliament.
With the SPD gaining a point to 27 percent and its traditional Green ally unchanged at 14 percent, neither camp has a governing majority in the poll of 2,440 voters conducted April 18-24. That raises the likelihood of a “grand coalition” after the Sept. 22 vote comprising Merkel’s bloc and the SPD of Peer Steinbrueck, her first-term finance minister. However, an alliance between Merkel and the Greens would also be possible.
That option faded with the positions adopted at the Greens convention. Not only did the party recommit to a coalition with the Social Democrats, its partner in government from 1998 to 2005, it attacked Merkel’s leadership during the crisis in the euro area that spread from Greece. Merkel has “shaken the foundations of European unity and solidarity” through her “savings diktat” and her focus on defending German interests, according to the final resolution agreed on by Green delegates.
“I don’t think the CDU-Greens are an option at the federal level,” Jan Techau, director of the Brussels center of the Carnegie Endowment, said in a phone interview on April 26. “It would tear both parties apart.”
The Greens tax platform was disputed even among party members. Winfried Kretschmann, the prime minister of Baden-Wuerttemberg, home to world-leading companies such as Daimler AG and SAP AG, warned in an open letter to his party’s leadership on the eve of the convention against harming businesses through tax increases.
“We’ll do nothing that hurts our small and medium-sized companies,” Kretschmann, whose state boasts Germany’s lowest unemployment at 4.3 percent, said in an interview with Sueddeutsche Zeitung newspaper published April 26. These businesses, known in Germany as the Mittelstand, “compete in global markets and need to invest massively in research and development.”
“We’ve already made clear in our program that we won’t hurt the Mittelstand’s ability to invest,” Priska Hinz said in an e-mailed response to questions. All the same, it’s “right to reassess all measures before implementing them when entering a coalition,” she said.
Germany’s federal budget situation makes tax increases unnecessary, Merkel’s Christian Democrat budget spokesman in parliament, Norbert Barthle, said in an e-mailed comment. The structural deficit will be in balance as the government reins in spending in compliance with a “debt brake” and tax revenue grows, said Barthle.
“It’s the wrong time to increase taxes,” said Barthle. “It would harm economic growth.”
Bjoern Saenger, a Free Democratic Party lawmaker, said in a text message that any plan to raise the top tax rate would hit the Mittelstand and skilled workers, “taking the ax to the positive economic development in the country.”
Merkel, whose CDU is the last of the main parties to formulate policy for the election, said last week that she wouldn’t raise taxes if re-elected for a third term. Neither is there much leeway for tax cuts, she said.
The Green party is in the midst of a “civil war” between those who founded the party as a radical alternative and “a new urban bloc of money-making Greens who drive BMWs and are emotionally attached to the party rather than ideologically” said Techau. “This will be a battle that we will see going on for years to come.”
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