Foundation for Family Businesses on the readiness for reform in Germany - study describes the way to an "Agenda 2030"
"Germany needs a new reform program for the coming years. Voters across many fields have begun to show the first signs of a willingness for change," said the Chairman of the Foundation for Family Businesses, Prof. Brun-Hagen Hennerkes, in Berlin. Under the title "Agenda 2030", the Centre for European Economic Research in Mannheim (ZEW), on behalf of the Foundation for Family Businesses, has examined how the German population feels about reform and how they could be won over for such an undertaking. "This study thereby provides the basis for a future government program," explained Prof. Hennerkes further.
The idea that the German economy is invulnerable characterises the political debate at the beginning of the Bundestag election campaign for 2013. This perception is problematic in several respects.
Firstly, because despite the reforms of recent years, there is still further need for change in many areas. Trends such as an ageing population and the shift of power in the global economy are moving inexorably ahead and require some adjustments. "The successful ‘Agenda 2010’ should be followed up by Agenda ‘2030’ as soon as possible with various reforms in areas such as health, public finance, infrastructure, education and the labour market," added Dr. Friedrich Heinemann, head of the ZEW research department Corporate Taxation and Public Finance and project leader of the study.
Second, the national debt and currency crisis in Europe has intensified this need for change. "Germany, especially now that it has become the anchor of stability in Europe, must operate a consistent and persistent policy of reform with regard to stable public finances and a growth-friendly tax and social system. The prevailing and often exaggerated economic complacency of today must not be the cause of harmful reform fatigue”, warned Professor Hennerkes.
Analysis: German attitudes towards reform
A widely held attitude among Germans facilitates major changes: Germans are, as the study shows, ready to practise patience in the present in order to achieve returns in the long-term. This attitude facilitates reform, which often requires making initial reductions in the present to secure future prosperity and to provide further growth. And the Germans should not be classified as fundamentally anti-technology. On the contrary, 80 percent are confident that technological innovation can make life easier, the EU average is around 68 percent.
Negative affects are shown to exist on the other hand in the form of a substantial loss in confidence in the relationship between voters and politics. However, especially in the economy, there are actors who people trust: Family businesses , for example, enjoy the confidence of 88 percent of those asked according to a recent Forsa survey for the study. The value for multinational companies is at a mere 15 percent.
The material and personal authority with which an economic adjustment is being touted is crucial. Because the attitude of the general public to reform is also marked by contradiction. The need for reform in the health sector is recognised, however concrete policies such as higher health contributions or benefit cuts are still rejected by many people. In fiscal policy, for example, a clear majority supports the notion that public authorities should create no new debt in the future. A group of respondents is not willing to accept higher taxes or spending cuts. Improve the acceptance of reforms
The study recommends using the abstract reform willingness of many people, to make fundamental decisions that permanently increase the pressure for reform. Referendums should also be brought increasingly into play, which are legally easier to introduce on the regional level than at the federal level. "The example of the Hessian debt limit showed that voters are willing to voluntarily subject themselves and their state legislature to the new debt brake: In Hesse in 2011, the new debt limit in the state constitution recieved 70 per cent consent in the referendum," said Dr. Heinemann.
In addition, the improvement of economic literacy and higher transparency in regard to costs plays an important role. The German population when compared internationally in terms of economic education is to be found sitting in the middle row seats. Significantly, this information deficit can also be seen on an individual level: Only 21 percent of respondents in the recent Forsa survey for this study correctly indicated the range of between 15 and 16 percent as the contribution rate for public health insurance.
An awareness of economic correlations has a direct impact on attitude: The support for a minimum wage is evidently less when the possibility of job losses, especially for the low-skilled, are taken into consideration. Furthermore, better informed citizens show themselves to be considerably more cautious when it comes to accepting government job guarantees or subsidies for industries undergoing structural change.
Cost transparency of campaign promises
According to the study, a practise that is being used in the Netherlands is recommended in terms of improved cost awareness and objectivity in election campaigns. In the Netherlands, the Central Planning Bureau (CPB) regularly analyses the programs of the major parties and presents estimates of how their measures would impact upon the budget situation. This analysis reveals when parties submit concepts that are not consistent with the consolidation targets they are allegedly pursuing.
It is striking how many political parties in Germany are working, for example in the area of tax policy, with models based on the estimation of clearly unrealistic revenues from certain taxes. A review of programs by independent institutions would bring about more seriousness in the field of tax policy but also in terms of promised performance. The study therefore recommends entrusting a politically neutral institution such as the German Bundesbank or the German Council of Economic Experts to appraise overall economic development (the economic situation) with the analysis and cost estimate of election programs in the German Bundestag election campaign.
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