German reform and democracy: The exhausting grind of consensus

Date: 30/08/03

In his push for economic reforms, Gerhard Schröder is changing the way German democracy works

A MUCH heralded commission chaired by Bert Rurup, one of the few top German economists who get their hands dirty in politics, has at last told Germany's Social Democratic-led government how to reform the country's creaking public-pensions system. In the commission's view, pension contributions should be capped (at 22% of monthly gross salary), despite an ageing population. More strikingly, Mr Rurup's commissioners want to raise the legal retirement age to 67 from today's 65, adding a month a year between 2011 and 2035. They have also proposed a new formula to calculate pensions, which would take into account the age composition of the population. Most painfully, Germans would have smaller incomes to retire on: 40% of average gross earnings instead of the current 48%.

These suggestions are milder than the minimal changes that more radical economists say are needed to put public pensions on a stable footing. But they are probably the most ambitious that Chancellor Gerhard Schröder has any hope of implementing. Even so, they have provoked a barrage of criticism and counter-proposals, in particular from his own ruling Social Democrats. And there may be further feverish negotiation before parts of the proposed reform are enacted in the Bundesrat, Germany's upper house of parliament, where the Christian Democrat-led opposition has a majority.

Whether or not Mr Rurup's plans are implemented, his commission shows how German democracy has changed in recent years - and illustrates Mr Schröder's approach to reform. The members of the Bundestag, the lower house of parliament, are supposed to “represent the whole people”, according to Germany's Basic Law, its constitution. But German politics is increasingly being conducted in councils, at round tables and by groups composed of academics, politicians, businessmen, lobbyists and ordinary citizens that seek to further reform while preserving Germany's post-war system of consensus.

The proliferation of such groups is due largely to Mr Schröder and his left-of-centre cabinet, who have created more of them than any other German government. New participants, alongside Mr Rurup's commission, include the National Ethics Council, the Commission for the Reform of Municipal Finances, the Council for Sustainable Development, and the Expert Commission on Corporate Governance. This commissionitis is now so pervasive that Hans-Jurgen Papier, head of the Constitutional Court, recently warned Germans of a rampant “deparliamentisation”. If parliament ceases to be the hub of politics, he said earlier this year, citizens will lose their sense of representation and elections will be devalued.

Yet Mr Schröder's seeming fondness for commissions is not due to a contempt for parliament. Rather, suggests Frank-Walter Steinmeier, who runs the chancellor's office, it is because the many checks and balances of Germany's consensual system mean that decisions cannot be taken quickly enough to match the break-neck speed of change wrought by globalisation and new technology. Commissions, Mr Steinmeier wrote in a candid article in 2001, are a way of breaking Germany's systemic gridlock.

At first this approach looked promising. For instance, after long negotiations a “nuclear consensus” was reached in June 2000, when a committee drawn from industry and government agreed to close down all Germany's nuclear plants within 32 years of operation. And then there was the commission chaired by Peter Hartz, the Volkswagen personnel director, which put forward a raft of proposals last summer to loosen the country's sticky labour market. Most of his ideas have been speedily implemented - albeit so far with mixed success.

Wait for the backsliding

But as the knife cuts closer to the fiscal bone, even hand-picked commissions are finding it hard to reach a consensus - and then the government is more often inclined to ignore their proposals. When, for instance, Mr Rurup's commission tried to come up with a separate blueprint for health-care reform earlier this year, it almost broke apart. Of its earlier more radical proposals, almost none has been included in the package which the government and opposition have finally agreed on. One of the few tough measures pushed through is that people with mandatory health insurance will, from 2005, have to take out an additional policy for dentures. But that is hardly the “once-in-a-century” reform that was promised.

Given the high-pitched tone of the pension debate, the Rurup commission's latest reform plans could yet be drastically watered down. This is largely because the ruling Social Democrats are in disarray. Some have called for a freeze on pensions; others have expressed outrage at such an idea. The opposition Christian Democrats are likely to be just as divided. Only the Greens and the Free Democrats, Germany's liberals, have been at all consistent, not least because they don't have powerful constituencies to worry about.

So are Germany's attempts to reach what Mr Steinmeier calls “an innovative consensus” as the best way towards reform failing? It is too soon to say, though recent experience is not encouraging. Certainly the legislative process needs straightening out. Most Germans seem to agree that there is too much of a muddling overlap between the Lander (Germany's 16 states) and the federal government in Berlin. Only a couple of days before Mr Rurup presented his proposals, both Social and Christian Democrats agreed to create yet another committee of experts - on constitutional reform.

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