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Angela Merkel was also in the Global
Tax 50
2016,
2015 and
2013 |
Now entering her fourth term as Chancellor, Angela Merkel
holds one of the most successful records of leadership in the
world. Thanks to the strength of the German economy, Merkel has
been able to run on a platform of lower taxes, full employment
and a budget surplus.
Moreover, her continued influence in the European Union has
allowed governments to join forces to push for tax measures
such as the turnover tax, and keep the possibility of a
financial transactions tax alive.
In Germany, meanwhile, this term is set to be her last, but
few politicians have had such good fortune. Yet the electoral
victory in September was bittersweet. After a dozen years at
the centre of power, Merkel is staring down new challenges.
Merkel's conservative bloc, the Christian Democratic Union and
the Christian Social Union (CDU/CSU), suffered their worst
result since 1949. Even the grand coalition with the Social
Democratic Party (SPD) was no longer seen as a viable
option.
As if this weren't bad enough, Germany has seen the
far-right Alternative for Deutschland (AfD) claim seats in the
Bundestag for the first time. The Social Democrats decided to
leave government and return to the opposition because the fear
was that the AfD may be left as the dominant opposition party
if the grand coalition remained in place.
The press began to talk up the possibilities of a 'Jamaica'
coalition, so called because it would bring together the Greens
and the Free Democrats (FDP) with Merkel's party. But the
negotiations had problems from the start and soon hit a wall.
The FDP campaigned to limit the flow of refugees, reduce the
size of the state and slash taxes much more dramatically than
the CDU.
Not only has the FDP tried to outmatch Merkel on tax reform,
the party's leader Christian Lindner walked out of negotiations
at the risk of triggering a new election. "I regret, with full
respect for the FDP, that we could not come to a mutual
agreement," Merkel told the press.
Tax reform was one of the key issues of contention, with the
CDU preferring a much more gradual approach than the FDP when
it comes to cutting rates and phasing out the solidarity tax.
Lindner called for €30 billion ($35.4 billion) in tax cuts
on the campaign trail. This was a part of the FDP agenda to
rapidly shrink the size of the state.
Although Merkel still has the strongest claim on government,
the German leader is in an awkward position with little clarity
over the prospects of forming a new government. She can either
cobble together a minority government with the Green Party or
try to persuade the SPD to return to government. The
alternative is a new round of elections.
As a consequence, the CDU has had to go back to the drawing
board and consider a grand coalition with the SPD. This is
despite the fact that the Social Democrats previously made it
clear they would return to the opposition ranks. In contrast to
talks with Lindner, Merkel may find it much easier to dilute
the CDU's low tax commitments to strike a new deal with old
friends.
Working with the SPD has served Merkel well in the past, but
the situation today is quite different. It took the two parties
the best part of 100 days to reach a coalition agreement in
2013. The stakes are higher and the game has only got more
difficult. The centre ground is not what it once was, but,
regardless, Merkel remains the strongest player.