Leaders from Germany's Center-Right Parties

Leaders from Germany's center-right parties on Saturday announced a raft of policies that will guide their new coalition government. Including some EUR24 billion in tax cuts and plans to extend the lifespan of Germany's nuclear power plants, the policies foresee a significant shift from the outgoing grand coalition Chancellor Angela Merkel's Christian Democrats shared with the center-left Social Democrats. The parties also agreed to extend the lifespan of nuclear power plans and move the responsibility for banking supervision to Germany's Deutsche Bundesbank central bank. Some key points of the agreement: TAXES: -Parties agreed on EUR24 billion in income tax cuts starting in 2011. -The coalition agreed on a simplification of tax brackets and to confront so-called cold progression, in which taxpayers end up in higher tax brackets even though their real, inflation-adjusted incomes aren't growing through pay raises. -Parties agreed to amend the business taxation system from Jan. 1, 2010, by easing companies' ability to deduct interest expenses and losses from their corporate tax bill. -Parties will explore ways to strengthen holdings in Germany; reforming rules for deducting losses and cross-border taxation of company profits among options to be explored. -Inheritance taxation will be changed by lowering the tax burden for siblings and their children and by amending rules to make the passing-on of businesses more "crisis-proof." -The allowance paid for children will be raised by EUR20 per child and the tax-free family allowance will be increased to EUR7,008 next year. BUDGET: -Tax revenues are to be used to help keep non-wage labor costs stable, by paying around EUR16 billion to the federal labor agency and around EUR4 billion to the public health-care system next year. -Parties agreed on eight "golden rules" for budget policy with the aim of limiting new debt and spending. The rules include more power for the cabinet when setting up the draft budget, implementing Germany's constitutional debt cap rule from 2011, committing to keep the rise in government spending below the rate of gross domestic product growth, and banning any extra spending on top of existing budget and financial plans. FINANCIAL MARKETS: -The Deutsche Bundesbank central bank will be put in charge of banking supervision, at the expense of financial services watchdog BaFin, which is currently sharing the oversight with the Bundesbank. -Parties will give priority to respecting the European Union's Stability and Growth Pact and respecting the independence of the European Central Bank and Bundesbank. -Parties aim to set stricter capital requirement rules for banks and establish regulation of all financial market products, actors and markets. -The coalition will call for changes in compensation for financial sector workers by linking compensation more strongly to the long-term success, and forcing pay cuts in a difficult economic situation. -Parties want to prevent the moral hazard of systemically crucial institutions by launching suitable legal instruments for a restructuring and winding-down procedure in order to either liquidate a systemic company of the financial sector that got into trouble in a market-sensitive way, or to stabilize it before it gets into insolvency. -The country's private equity is to be boosted by creating a "common attractive venture capital market" and abolishing "unnecessary hurdles" to the German REITs market. -Parties will examine whether to launch a unified and standardized securitization law to set a transparent standard. -Coalition will promote efforts to set up a European rating agency. ENERGY: -Parties agreed to extend the lifespan of Germany's 17 nuclear power plants, effectively abandoning a nuclear phase-out scheduled for 2021. The government will negotiate conditions of the extension with utilities, particularly on how windfall profits from keeping plans open can be spent. -Calling nuclear energy a "bridge technology," the parties preserved a ban on building new nuclear power plants in Germany and said nuclear power will remain in use until "renewable energy can reliably replace it." -Parties will aim to reduce carbon dioxide emissions to 40% below 1990 levels by 2020. -Within the next year, parties want to draw up new goals for the percentage of power to be drawn from renewable sources and those from traditional outlets. -Setting up a single electricity transmission grid network operator, or Deutsche Netz AG. LABOR MARKET: -The parties oppose a general minimum wage and will review existing minimum wages in specific sectors. They also advocate a legal ban on "immoral" wages, defined as one-third below average wages in a given sector. TRANSPORTATION: -The parties plan a step-by-step privatization of rail operator Deutsche Bahn AG "once capital market conditions support this." The also plan promoted greater independence for and increased competition among operators on the nation's railways. The current grand coalition government called off the planned partial privatization of Deutsche Bahn last autumn due to bad market conditions. HEALTH INSURANCE: -Injecting around EUR4 billion budget into the public health-care system next year and boosting competition in the system. -Setting up a commission that will work on a reform of the health fund, which pools fixed-rate health-insurance payments from employers and workers. For now, the fixed insurance premiums, currently set at 14.9% of workers' gross pay, will stay in place. But in future, insurers will have more leeway to set their own premium levels. -Keeping extra payments from individuals at 1% of income that insurers can demand if the insurers' costs resulting from medical treatment exceed their intake from the health fund.