Ambitious Goals, Deficient Output: Tax and Fiscal Policies of the Conservative – Liberal Government, 2009-13
German Politics (2014) - Volume 23, Issue 4
19 Pages Posted: 20 Feb 2016
Date Written: 2014
Tax policy was at the heart of the Merkel II government’s reform agenda. The CDU/CSU and FDP promised significant tax cuts and simplifications of the tax system. During their term, however, they remained the least active of all German governments of the last four decades. Why? This article argues that a combination of factors relating to the dynamics of electoral competition and structural problem pressure can explain this outcome: The new constitutional debt brake and the Euro Crisis foreclosed the traditional ‘solution’ of glossing over the conflict within the coalition between its economically liberal constituency (FDP and parts of CDU/CSU) and pro-welfare state constituency (other parts of CDU/CSU) by combining tax reductions with continued high spending. The result was a devastating loss for the FDP in the 2013 elections, and a victory for the CDU/CSU which profited from positioning itself as a moderate and stabilising political force in uncertain times of crisis.
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