Saturday, 12 November 2005

Germany's "Grand Coalition"

It seems like Frau Merkel is ready to lead her "Grand Coalition" government.

Supposedly this is the first time in decades that the CDU/CSU and SPD have united in a coalition government.

What Germany needs is someone to liberalise its economy (akin to what Thatcher did when she was the UK's PM). As a libertarian, I decry Germany's over-regulated economy. Granted, the re-unification of West and East Germany hasn't helped matters. Nevertheless, this is not the entireity of Germany's problems.

In essence, the "social market" model is failing. With so much regulation, economic growth has been sluggish. Germany has been one of the worst performing G8 nations over the past decade. GDP growth over that period has only averaged around 1% (in the UK it's been over twice that rate). The heightened level of regulation (via the inflexible labour market) is also contributing to Germany's relatively high unemployment rate.

If (somehow) I were Chancellor of Germany, I'd repeal all regulations on business and greatly lessen personal taxation. Without these regulations, businesses would be freer to hire and fire, hence lessen the scale of unemployment.

Germany (or more accurately the former West Germany) was one of the fastest growing major world economies in the post-war period. Whether Merkel and her SPD coalition allies can restore former glories remains to be seen, at present.