Public Policy

February 12, 2018

After coalition deal agreement, is a new German government in the making?

German Election Coalition

The coalition talks which started on 26 January between Conservatives (CDU/CSU) and Social Democrats (SPD) ended on 7 February, in surprisingly short time. Both parties agreed on a new coalition deal. Before a government can be formed, the deal must be approved by SPD member vote.

Under a new government, the Social Democrats will take the three influential ministries of finance, labour, and the foreign office as well as the environment ministry. The Conservatives will head the ministries of health, economics (including energy), agriculture (including food) and transport (including digital).

Main outcomes of the coalition agreement for key sectors:

Health: No overhaul of the health insurance system; new legislation on e-health. The dual structure of German health insurance (private and state health insurance) will remain in place, but contributions to state health insurance are to be financed equally by employers and employees. Counter to a ruling of the Court of the European Union, mail orders for prescription drugs will be banned. A second e-health law is to be adopted with action including the introduction of an electronic patient record. The current ban on remote medical treatment is to be re-assessed. The introduction of new e-health apps is to be facilitated. Further action in the area of e-health can be expected within national action plans.

Food: New food labels announced. A state-administered food label for animal welfare is to be introduced, applying to meat and meat products. For sugar, fat and salt in ready meals, a national reduction strategy is to be elaborated in cooperation with affected parties. The coalition agreement does, however, not mention the introduction of bans, taxes or specific labels for sugar, fat or salt.

Energy & Environment: Little to no new legislation announced. Climate targets for 2020 (40% reduction of greenhouse gases relative to 1990) have been given up, but ambitions are to meet reduction objectives as closely as possible. Climate targets for 2030 and 2040 remain in place. Germany is to establish LNG infrastructure. Coal-fired power generation is to be phased out. Renewables shall provide 65% of the national electricity demand by 2030.

IT/Digital: The commitment to net neutrality is emphasised. Action outlined in the agreement focuses mostly on building up nationwide high-speed (fibre-optics broadband) internet infrastructure by 2025.

Financial markets: No new national financial market regulation announced. Germany wants to increase its attractiveness to fintechs by cutting down red tape. Criteria for the systemic relevance of hedge funds and shadow banks are to be elaborated on European or international level. Systemically relevant institutions are to be subject to greater regulation and supervision.

Different measures are announced to increase availability and affordability of housing space. Tenants’ rights are to be strengthened with regard to rent increases after renovation works. The rental brake remains in place, but is to be reviewed at a later point.

Is Merkel’s fate a close call? Social Democratic Party members need to give their approval now

Before a new Grand Coalition government can be installed, the 440,000 members of the Social Democratic Party are called to approve the coalition agreement in a member vote. The Party has run a large campaign in the last weeks to attract new members. A result can be expected within 3 to 4 weeks. Whether or not the Social Democrats will approve the coalition deal remains a close call.