23 June 2013

WSJ: Merkel spending plan targeted before vote

Chancellor Angela Merkel continues to prescribe tough deficit cuts for weakened eurozone countries, but at home she is trying to secure a third term in office with promises of new spending aimed at luring voters from her political rivals.

In the election manifesto of her alliance of Christian Democrats and Christian Social Union, their Bavarian sister party, Ms Merkel's conservatives are pledging about €30 billion in new spending on everything from new roads and bridges to pensions for mothers, tax breaks for families and a new rent cap to stop the rise in inner-city rents. 

Ms Merkel has ruled out any tax increases to pay for her election pledges. Critics, including those within the parties in her centre-right coalition with the pro-business Free Democrats, warn that she will be able to fulfil her promises only by raising the federal deficit. That contrasts with the medicine that Ms Merkel is asking the rest of Europe to swallow, say critics, and runs counter to her government's goal of balancing the budget next year.

The conservative campaign platform amounts to a broad mix of populist policies that offers voters on the right and the left something with which they can identify. Ms Merkel aims to placate her conservative clientele with aid for families, rejection of Turkey's membership in the European Union and a hard line on aid for weakened eurozone countries. Her programme also usurps ideas from the main opposition Social Democrats, such as a minimum wage, tougher urban rent control and raising pensions for stay-at-home parents. Those tactics have made it difficult for Peer Steinbrück, the challenger from the left-leaning SPD, to gain ground against the popular incumbent.

Current opinion polls show that Ms Merkel's conservative alliance is likely to pull the most votes in September. The problem is that her junior coalition partner, the FDP, is weak, polling just above the 5 per cent mark needed to win seats in Parliament. At the moment, most polls show that the most likely outcome of the election will be a grand coalition of Ms Merkel's conservatives and the SPD, analysts said.

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