Der deutsche Bundeskanzler im Wandel der Zeit: Ist der Begriff Kanzlerdemokratie noch zeitgemäß? (Ge

Governance in Contemporary Germany: The Semisovereign State Revisited

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Dabei beleidigt er den Journalisten Volkart. Korruption Bestechung Ukraine Urteil. Kameradiebstahl an Wintzer mit Gewalt. Verletzung des Briefgeheimnisses Rotkehlchenweg. Frau Nabowsky stellt in mehrerlei Hinsicht eine Ausnahme dar: Wir warten auf den Totenschein. Juni im US-Bundesstaat Virginia stattfindet. Das geht aus …. Im Rekordjahr haben Menschen … Das bedeutet: Als der Staatsanwalt Hans-Dieter Heidbrede am Zusammen mit dem ebenfalls skrupellosen Geiselgangster Michael Heckhoff 50 ist es Michalski 46 gelungen, aus der als ausbruchsicher geltenden Justizvollzugsanstalt in Aachen zu fliehen.

Allem Anschein nach hat ein Vollzugsbediensteter den beiden Verbrechern geholfen — er wurde am Freitag unter dringendem Tatverdacht festgenommen. Die Fahndung nach den beiden ausgebrochenen Schwerverbrechern dauert an. Am Samstagabend wurde bekannt, das beide in einem 5er BMW mit Essener Kennzeichen unterwegs sein sollen, den sie einem Ehepaar gestohlen haben, das sie zuvor als Geiseln gehalten hatten.

Einen Beruf hat der Herforder nicht gelernt. Doch Michalski war in seinem kriminellen Tun nicht zu stoppen. Zusammen mit seinem Komplizen Thomas K. Michalski hatte sich an dem Jugendheim mit einem geladenen Karabiner auf die Lauer gelegt. Eine Hand hatte aus dem Erdreich geragt. Als Heckhoff den Wagen inspizieren wollte, wurde er angeschossen. Die Opfer erlitten schwerste Verbrennungen. Many of the issues discussed and decided upon in the public sphere are inherently problematic.

In fact, the problematic character of a social issue is often the main reason why it is labelled a political question and placed on the political agenda. Although political problems exhibit great variations, there is a common structure to many of them. The following categories are recurrent.

Group interests versus public interest: The representatives of any such sector will defend their interests. At the same time, everyone knows that if they neglect the public interest altogether, society will collapse. What one chooses to do now will affect the set of alternatives available later on.

A decision to save reduces consumption today but increases the room for consumption tomorrow. Exploitation of natural resources now may irrevocably reduce the set of choices available to future generations. Markets are efficient in a sense that can be made precise Pareto efficiency , but market solutions are not always perceived as fair. Inequalities of opportunity tend to be reinforced rather than reduced or eliminated by market mechanisms. For this reason, redis tribution has been considered as a legitimate undertaking for the political sphere for a long time.

Human decision-making in all fields is fraught with uncertainty, and the public sphere is no exception. Furthermore, information is in most cases asymmetrically distributed. Producers know more than consumers about the goods and services they produce. High-level civil servants who should serve political decision-makers are often better informed about their field than the latter. Politicians are better informed than voters about both decisions made and plans for the future.

The common feature of these problems is that they have no obvious solution. They are variants of the same moral dilemmas that individuals face in their daily life. In fact, some of the design solutions presented in the reform blueprint below aim at exploiting these analogies. Institutions are among the most important instruments that society has at its disposal for handling these important and recurrent dilemmas. Given the uncertainty of the outcome, it should come as no surprise that the institutional solution chosen will bias social choices. At the same time it is necessary to underline that institutions on their own do not determine the outcome.

Informal norm systems and political traditions are other important factors. For this reason, institutional experiences cannot be imported wholesale from one country to another; care must be exercised in the adaptation. Conditions for successful reforms Numerous factors influence the outcome of reform efforts. Some of these are given and not amenable to change, at least not in the short run. Others can and should be considered as design parameters by reformers. Environmental factors Crisis A general crisis helps in creating preparedness for reform.

In particular, if the on-set of crisis is rapid, this in itself will often trigger reform discussions. On the other hand, a crisis is not enough; there are plenty examples of countries that have experienced deep crises without significantly altering the design of their basic institutions.

Interest groups All significant reform efforts are met with resistance. Depending on the situation at hand, such resistance may be concentrated to small but well organised groups or more generally dispersed across the electorate. The design of the reform plan must take such aspects into account. Empirical research Good policy-making is based on facts, and solid empirical research helps in sharpening arguments.

Many policy areas are well supplied with analysis, others less so. Agricultural policy is an area where literature is very rich and arguments for reforms are strong. Literature on labor market policy by contrast is less clear on the whole; effects of various policy measures are less obvious, although some stylised facts can and have been formulated. Fiscal policy institutions represents an intermediate in this respect; different institutional levels have been analyzed, but there are sufficiently important results in the literature to justify serious consideration. Controllable factors Reform climate Spontaneously, one would think that managing one reform project is easier than managing several simultaneously.

Somewhat paradoxically, the converse may be true. Running several reform projects at the same time may contribute to creating a reform climate that facilitates further reform efforts. Sweden is an example of a country that established such general conditions conducive to reform in the second half of the 's, by reforming inter alia its tax system, and by deregulating financial, agricultural and textile markets.

Design Reform packages should preferably be based on a handful of simple principles, forming the basis of more elaborate proposals. The main merit of such an approach that parties involved in a reform discussion may be more open to discussing principles than to discussing concrete proposals, when possibly negative consequences are more visible. An example from fiscal policy is given below in section 3. Fairness Fairness is fundamental to success. If a reform package is not considered reasonably fair by the electorate at large, there is little chance of general acceptance.

This has consequences both for reform design as such and for the way reforms are presented to a wider audience. Packaging Substantial pedagogical effort must go into presenting a reform to the electorate. Some policy areas are simpler to handle in this respect than others. Fiscal policy is manageable, in the sense that the metaphor of the national household is comprehensible also to people without thorough economic know-how.

Everybody understands that one cannot spend more money than one has in the long-run. Tax policy, by contrast, is relatively difficult. People without training in economics often fail to see the difference between taxes and other sources of financing, and find it hard to understand the idea of indirect costs associated with tax extraction. Entrepreneurs In a democracy, reform decisions must be backed by a majority of voters.

But the design of a reform package is not necessarily done best by a large committee composed of representatives from all parties involved. In fact, experience shows that successful reform design efforts are often driven by relatively small groups consisting of politicians and experts in the field. An interest group or a minister engaged in a certain sector gets substantial benefits from increased expenditures but pays only part of the costs.

Recognising that the fact norms will be insufficient to balance this drift towards higher expenditure, political decision-makers can create various types of re-strictions such as balanced-budget constraints, golden rules, bounds on indebtedness etcetera. For the credibility and long-term stability of such rules, it is essential that political decision-makers take full responsibility for the rules. Referring to higher levels, stability pacts, and similar external forces will undermine the stability of the rules.

The details of the regulatory framework should mirror overarching political goals Whether political goals will be realised or not is decided at the microlevel by thousands of daily decisions by households, civil servants and other agents. Ambitions pronounced at the highest political level are not meaningful to these individuals. A declaration that inflation must be reduced or that the budget balance must be improved simply has no connection to decision situations that individuals face. Restrictions must be felt in the capillaries of the administrative and economic systems in order to have an effect.

It is therefore an important task to translate political ambitions into micro-rules that are perceived and understood by individual agents. The financial powers of the parliament should be actively exercised In most democracies, parliament is perceived as a body where ideas for increased expenditure levels are generated, whereas government is a force that contains such drives. In consequence, increased fiscal discipline should be accomplished by decoupling parliament from financial decision-making as far as possible. Such a design principle can be questioned both on factual and on democratic grounds.

On the contrary, the leading design principle in this context must be that parliaments should be fully involved, and that the motives for budgetary restrictions are presented in full detail to the members of parliament so that these motives can be understood, internalised and defended in the public debate.

Not all such commitments are visible on the expenditure side of the budget. Guarantees need not imply immediate expenditure but can imply a heavy burden in a more distant future. The same holds for loans. Investments do not only call for payments by installments but give rise to increased running costs during their life-time. Tax expenditures are expenditures on the revenue side of the budget which are not visible without a specific account presenting the character and approximate amount of revenues foregone.

The budget document should be complete and fully covering The requirement on completeness has several aspects. Firstly, all commitments should be represented, that is, no extra-budgetary funds should be permitted to lead their own lives outside the budget document. All expenditures should be tried and questioned annually within the framework of a coherent budget process. Social security funds in some countries enjoy a certain autonomy, but a minimum requirement is that a full and fair account of the current status and foreseen development of such funds be presented in the budget document.

The same can be said for the finances of lower levels of government. If certain subsystems of the central government expenditure system generate both revenue and expenditure, revenue should be presented on the revenue side of the budget, and expenditure on the expenditure side. For reasons of transparency, no netting should occur within the subsystem. Long-term aspects should be highlighted Even in a budget system relying on multi-annual restrictions, there will be commitments that go beyond the decision period covered.

It is important that an outlook on such long-term commitments be pre sented in order to give the parliament and the public a fair picture of the future of public finances. Relevant examples are the development of welfare systems against the backdrop of demographic change, and large investments in infrastructure. Very long-term effects are notoriously difficult to handle. So-called generational accounts have been developed as an analytic tool for the very distant horizon, but have not reached operational maturity. Building-blocks for an improved budget process Top-down budgeting A top-down approach to budgeting is absolutely mandatory both in the preparatory phase and the decision phase in parliament.

In the preparatory phase, the following steps apply: The concrete expression is a list of budgetary expansions foreseen for high-priority areas and possible expenditure cuts for low-priority areas. In the decision phase, the top-down approach takes the form of a twostep procedure. In the first step, parliament votes on the total expenditure level and the partition into main expenditure areas. In the second step following this vote, the detailed proposal is processed. At this stage, counter-proposals to the government proposal must respect the outcome of the first vote; proposals that do not should be discarded by the chairman of the parliament or the standing commit tee as applies.

In concrete terms, proposals that imply expenditure increases must be financed within the same expenditure area. Financing proposals should be tested for credibility by an independent authority. A number of parameters has to be determined in this context. First, the time span must be decided upon; in practice, the choice is between 3, 4 or 5 years.

A second aspect to be determined is whether the ceiling should be determined for a fixed period or on a rolling basis. In the Netherlands, the ceiling is determined for the electoral period as a point on the agenda for political negotiations preceding government formation. In Sweden, the ceiling is tri-annual and is determined on a rolling basis. This ensures continuity but can theoretically give rise to problems in the event of a change in government. On the other hand, a parliament with a new political majority can always take a new decision based on a different level for the ceiling.

The ceiling should preferably be formulated in nominal terms, independent of the rate of inflation. This adds credibility to a policy of low inflation and influences expectations in the right direction. Gross budgeting and tax expenditures In line with the general principles stated above, the expenditure ceiling and the budget should rely on the gross principle, that is, revenue and expenditure should be kept apart.

Tax expenditures should be estimated annually and published together with the budget, as they may be an important source of financing in case revenues are considered to be inadequate. In the Swedish system, all central government expenditure is included under the ceiling except interest payments on the state debt. The latter are excluded because they cannot be affected by political decisions in the short run; the state does not differ from any other legal personality in the role of the borrower.

No exceptions have been made for business cycle-dependent expenditure such as labor market insurance. Such fluctuations should be taken care of by means of explicit mechanisms of flexibility see below. Open-ended appropriations abolished A comprehensive expenditure ceiling may collide with entitlement legislation for instance in the social security area. This type of expenditure is often handled via so-called open-ended or entitlement appropriations which are incompatible with the idea of an expenditure ceiling.

On the other hand, the government cannot reduce or discontinue payments of allowances without a parliamentary decision. But the potential conflict exists only at the aggregate level; based on political priorities, the government may choose to re-allocate expenditure within the bounds given and present a proposal to parliament that either includes entitlements in a general packet of expenditure cuts or keeps them intact. In this way, compatibility with entitlement legislation is ensured.

In order to provide a reasonable degree of freedom, flexible appropriations permitting an overrun up to a prescribed percentage level can be used. In the event of an overrun, financing must be secured from the same appropriation during the following year. Small savings can also be permitted. Explicit handling of uncertainty Economic forecasts are uncertain. There is need for a budget margin in order to cope with such uncertainties. Because uncertainty increases with time, the same must hold for the margin.

The order of magnitude necessary is typically one or a few percent of the total budget level. At the appropriation level, uncertainty may be greater, sometimes much greater. If public finances develop favourably, there is a temptation to use the budget margin for other purposes than originally intended. That is why it is necessary to establish rules for budget margins which clearly limit their use to coping with unforeseen expenditure.

Legitimate sources of uncertainty are business cycle-related increases, major natural or technical disasters or the like. Political initiatives which lead to permanent increases in expenditure levels are precluded. There are other unforeseen changes that are purely technical and should cause no problem. Moving an appropriation from one expenditure area to another calls for a re-computation of the cap on the expenditure areas affected by the change.

Changes in the way transfers between different levels of government are accounted for sometimes lead to changes in revenue and expenditure that are neutral with respect to the budget balance; these should cause no problem. By contrast, the introduction of a tax expenditure system that causes the balance to deteriorate should lead to an automatic adjustment of the expenditure ceiling.

The long-term credibility of the ceiling depends directly on the practice established in similar cases. Improved annual budget cycle A general rule for the preparation of the budget is that the centre of gravity should be placed early during the budget preparation year in order to create stability. If the budget proposal refers to year Y, the following approximate timetable could apply: Y-1 January General budget directives are sent to ministries. February Ministries supply material on their respective political priorities and also list of possible expenditure cuts.

A general discussion on priorities is held within the cabinet, resulting in directives to the Minister of Finance. The proposal should contain the total expenditure level for the next three years plus a partition into expenditure areas for the coming budget year, as well as the most important items on the revenue and expenditure side of the budget for the coming year.

April Cabinet all ministers , plus the state secretary or vice-minister from MoF meets during approximately two days in early April to decide on the main parameters of the budget. The meeting should be held away from the government offices, and ministers should be supported by their civil servants only intermittently by phone.

The top-down approach applies two-step procedure. The proposal from the MoF is the default proposal if consensus cannot be not reached on an alternative. Mid- to late April The budget proposal is presented to the parliament and the public. Early June Parliament votes on the proposal. June-August Elaboration of detailed budget proposal. September Presentation of the detailed budget proposal for the coming year. The top-down approach applies. Early December Final vote on the budget.

Monitoring of in-year budget development The combination of a budget ceiling and expenditure systems that are difficult to affect in the short term creates a need to react early when an overrun is foreseen. A simple early warning system for each appropriation could be based on statistics from previous years.

The ministry responsible for a certain appropriation reports to the cabinet and supplies a proposal on how the overrun in question should be managed. The cabinet in turn reports to parliament and suggests remedies. Overruns should preferably be financed from the same area of expenditure where the overrun occurs; if this is not possible, at least from the same ministry.

As a last resort, collective financing may be necessary. This includes the right to decide on taxes and to decide on the purposes for which public resources should be used.

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A budget act sometimes called an organic budget law specifies in precise terms what share of these powers are delegated to the government. A budget act, often combined with general rules for financial management in the state, contributes to transparency and reduces the risk of conflicts over competence between the government and the parliament. Swedish experiences Major results can be achieved in relatively short time It is possible to achieve a lot in relatively short time when using a window of opportunity for a concentrated reform effort.

Figures 1 and 2 show two evaluations of the Swedish budgetary process, one representing the status of , the other representing the situation after three years of intensive reform. Stabilisation of public finances The stability of Swedish public finances has improved drastically since the early 's, when Sweden and Greece had the largest deficits in the whole OECD area. Developments of the debt ratio and the expenditure ratio since the early 's are shown in Figure 3.

Several factors have contributed to the outcome, and it is difficult to specify how much depends on the budget reform. Obviously, in the short run any program of stabilisation has to be filled with concrete proposals for expenditure cuts or tax increases. The budget process is important when organising this work but leaves an imprint mainly in the medium and long run. Debt ratio and expenditure ratio percent in relation to GNI for Sweden from the early s to present Central government debt in relation to GDP — 0,9 0,8 0,7 Ratio 0,6 0,5 0,4 0,3 0,2 0,1 0 Year All data in percent Public expenditure in relation to GDP — 0,8 0,7 0,6 Ratio 0,5 0,4 0,3 0,2 0,1 0 Year All data in percent Stabilisation of the parliamentary budget process The new budget process in parliament, in particular the top-down rule, has profoundly altered the behavior among members of parliament.

It has become much more difficult to create broad coalitions for increased expenditure. Furthermore, there are no problems of consistency when it comes to financing changes to the government proposal. There is a theoretical underpinning for the idea that the division of the process into two steps should reduce the risk of parliamentary instability.

Stabilisation of government Given the new procedure, it is easier for a minority government to get a budget proposal through parliament. This is due to the fact that according to voting practices in the Swedish parliament, it is not necessary to have a majority for a proposal; it is sufficient not to have a majority against it.

But a government's policy does not consist of a budget only. For this reason, the social-democratic minority government has chosen to cooperate with other parties during the latest twelve years that it has been in power. Loopholes of limited importance No system is fool-proof, and it is not desirable to have zero flexibility in the environment in which a budget system is supposed to operate.

There have been abuses of the regulatory framework during the decade that the system has been in operation. However, they are fairly limited and lie by about one or two percent of total expenditure accumulated. The increasing use of tax expenditures is the most important and obvious breach of the rules. Also, technical adjustments have been applied in an symmetric fashion in order to create more room for expenditure.

The first class of problems is of course the most important. To some extent, it has been handled by building safety measures into the balance restrictions. Present policies for the central government budget balance require a two percent surplus on average over a business cycle. Expenditure ceiling should be mandatory The Budget Act of leaves open the question whether an expenditure ceiling should be applied at all. In hindsight, this was not a good solution. An improved budget balance tends to generate more lax behavior, which should be prevented by making the use of the ceiling mandatory.

Monitoring and evaluation not yet integrated into the annual budget cycle There is a natural cycle which devotes the spring session to the highlevel decisions on fiscal policy, to the expenditure ceiling and to evaluation, and the autumn session to the detailed budget proposal. But when evaluating the new process after a few years of operation, the parliament chose to move the decision on expenditure ceiling to the autumn session, thereby losing some of the stability of the previous model.

Evaluations, which come naturally when annual reports and audit reports for the budget year are published, still attract little attention in parliament. Details are important The Norwegian parliament has rules on voting which differ from those applied in Sweden.

When an opposition party in Sweden looses a vote in a standing committee in parliament, it will abstain from further voting. In Norway, members of parliament are obliged to vote, which leads to a different voting arithmetic. In consequence, the Norwegian budget reform, which was copied from the Swedish one, has not had the same effects on parliamentary behaviour. These differences refer to practice only and are not codified in the parliamentary orders of the two countries. A general conclusion from this example is that details may be important, and that rules of conduct should be taken down in written form as far as possible.

Budgetary reform and democratic values It is sometimes alleged that a budgetary reform of the type described here is a threat to democratic values. A deeper analysis shows that this is not the case. The new budget procedures applied in Sweden now enjoy wide support, which is also an indication of their consistency with democratic values.

Fur the purpose of the analysis, we define democracy as a system of governance defined by three components: Only a very succinct account is given here; for details, the reader is referred to the books listed at the end. Popular rule The main contribution of the new process is to increase transparency by making necessary trade-offs and other political choices more visible.

This generates more discussion and more deliberation, not less. The political parties and the government are forced to display their priorities to the electorate in a more clear-cut fashion. Reporting to parliament has improved, which benefits the mass media and the electorate. Constitutionalism Constitutionalism refers to governance by law.

The creation of a budget act has accomplished a clearer distribution of competences between parliament and government than previously obtained. The room for discretionary choice has been reduced in favour of rule-governed behavior. The decision process in parliament has become more efficient in the sense that collectively irrational behaviour is less likely to occur. Institutions, Politics, and Fiscal Policy. In von Hagen and Strauch Budgeting Procedures and Democratic Ideals: An Evaluation of Swedish Reforms. Journal of Public Policy 21 1 Persson, Torsten, and Guido Tabellini.

The Economic Effects of Constitutions. Das ist der Kerngedanke einer intergenerativen Gerechtigkeit. Dabei stehen beide Kriterien in einem festen Zusammenhang. Ist die Wachstumsrate geringer, dann ist die Neuverschuldungsrate, die mit einer Beibehaltung des Schuldenstandes von 60 Prozent kompatibel ist, geringer als 3 Prozent.

Dabei geht es insbesondere auch darum, die Aufgabe der Haushalts konsolidierung in den Kontext der wirtschaftlichen, sozialen und finanziellen Auswirkungen des demographischen Wandels zu stellen. Nach einem unbefriedigenden schleppenden Beginn Abbildung 1: Insbesondere in einigen der neuen Mitgliedstaaten ist der Schuldenstand sehr niedrig. European Commission, European Economy No. Der zweite Indikator unterstellt, dass auch im Jahr das geltende Schuldenstandskriterium einzuhalten ist, d.

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Das zusammengefasste Ergebnis der Kalkulationen ist nach dem Bericht der Kommission das folgende: Welchen Wert hat die Handlungsoption Haushaltskonsolidierung in der langfristigen Betrachtung? Gerade dieses Instrument des Austausches von guten Beispielen ist von hohem Wert, denn bei der Methode der offenen Koordinierung geht es nicht darum, Schlusslichter zu bestimmen, vielmehr ist es das Ziel, voneinander in der EU zu lernen und sich zu ermutigen, die gemeinsam gesetzten Ziele zu erreichen.

Es gibt Parallelen zum Thema Klimawandel: By , the median age of the world's people will be 38 years, ten years more than in While the world's population will continue to grow to reach nine billion by the middle of the century from 6. The United Nations estimates that fourteen countries will have a median population age of fifty years or more by the middle of the current century, one-half of them in Eastern Europe. The reverberations of demographic change go well beyond this group of countries, however: China's old-age dependency ratio is forecasted to grow four-fold during the first half of this century, while the ratio will triple in Latin America.

At current trends, Russia's population will have shrunk by almost one-quarter by and even in countries with rapidly growing populations, such as Saudi Arabia, the share of elderly citizens will rise fourfold, to reach similar levels in as those that are currently typical for North America. The selection of countries covered does not imply that aging populations are not a concern for the countries excluded. Rather, the lack of global coverage is due to limitations with respect to comparable data. Almost all countries will face a very significant deterioration in public finances over the next half-century as a result of demographic change, unless a countervailing fiscal adjustment is put in place or social security and other age-related spending programs are reformed.

Initially, the pressure from age-related spending will remain very moderate. Starting early in the next decade, however, the burden will gradually increase, leading to deteriorating fiscal indicators. A typical country's deficit would rise to more than four percent of GDP by the mids, assuming no policy change. The interest cost of the additional borrowing required will exacerbate the demographic spending pressure, and deficits would rise inexorably to almost six percent in and to fourteen percent by the middle of the current century.

Although the median general government net debt burden will remain relatively steady at about 32 to 33 percent of GDP through to , it will start to rise slowly thereafter, accelerating sharply from the late s. By the mids the net debt burden will surpass a still manageable 80 percent of GDP, but will reach an overpowering percent of GDP by Higher debt-service costs and agerelated spending will significantly increase the economic weight of the state.

Government spending will rise to 56 percent of GDP in , from 44 percent today. A wide variation of country experiences hides underneath those aggregate numbers. Certain countries, especially the Scandinavian and Baltic group of sovereigns, but also Austria, Canada, Australia, and New Zealand, would perform considerably better than the sample average, and will be able to keep their debt burden at or below percent of GDP even by On the other hand, certain continental European countries including France and Italy would post debt bur dens well above percent of GDP by The Czech Republic and Hungary could face a net debt equivalent of four times as high as their output by , similar to levels in Portugal and Greece, with whom they share the low fertility, large budget deficits, and largely unreformed systems of health care provision and social security.

Predictably, Japan will continue to have the highest net debt burden, which, at current trends, would surpass an implausible percent of GDP in the mids. The consequences of this hypothetical fiscal outcome would be inconsistent with the current high level of ratings on sovereigns covered in this study. Using budget balance trends as empirical longterm proxies for sovereign creditworthiness, a collective slide down the ratings scale would commence early in the next decade.

Its initially gentle decline would accelerate by and continue until the mids, by which time the vast majority of countries would display fiscal characteristics that today are associated with speculative-grade sovereigns. It is inconceivable that governments will allow debt and deficit burdens to spiral out of control in the manner outlined above.

In fact, several governments, such as France, Austria, Germany and Italy have embarked on structural reform likely to mitigate the pressure described here. Nevertheless, the magnitude of the challenge, as indicated by the fiscal development described above, will require further decisive steps in almost all countries in the sample. Elements of age-related public spending All sovereigns in the sample will experience varying degrees of upward public expenditure pressure related to budgetary items that are sensitive to demographic change see table 1.

The age-related spending categories considered in this study are old-age pensions including early retirement schemes , health care, long-term care for the frail and unemployment benefits. Pensions exert by far the most spending pressure, while the expected relief from lower unemployment benefits is typically very small see table 2. Education was not included as an age-related spending category.

Although the number of pupils and students will decline in most countries, often dramatically, it is likely that spending per student will rise to ensure satisfactory productivity growth, given that the countries in this sample tend to be knowledge-based societies and economies. Child benefits were also excluded due to the lack of data. Although shrinking child-age cohorts could have a dampening effect on public spending through lower benefit outlays, comparable data is unavailable. Moreover, the cohort effect may be offset by more generous benefits to encourage the dual objectives of boosting labor market participation and fertility, as witnessed in several countries already.

Pensions including early retirement, surviving relative and disability pensions are the most important source of expenditure pressure in the sample, rising by more than four percentage points of GDP from current levels by However, other spending categories also play an important role.

The median demographically driven increase of public health care spending is projected to be 1. During the same period, the median cost of long-term care for the frail and elderly will increase by another 1. Potential savings on the shrinking, younger end of the population pyramid are likely to be minuscule, as argued in the preceding paragraph. The expected median fall in unemployment benefits as a consequence of tightening labor markets will be only 0.

All our spending projections are based on national estimates, mostly in the context of multilateral research projects conducted at the OECD and the European Commission. When interpreting the numbers and the fiscal consequences simulated below, the limited comparability must be kept in mind. Thus, overoptimistic official estimates may lead to too rosy a fiscal and ratings trajectory, and vice-versa.

Nevertheless, broad orders of magnitudes should be sufficiently precise for analytical purposes, especially over longer timeframes. A second important caveat concerns projected health care expenditures, which are to a significant extent determined by the penetration of technological progress, which by definition is as yet unknown. The simulations share two assumptions, unless stated otherwise: It is identical to the primary surplus in all future years excluding the effect of incremental future post age-related expenditures and changes to the debt-service bill originating from declining or rising government debt levels relative to This means that all citizens receive exactly the same average mix of taxes and non-age-related public services as in The cut-off was chosen as major fiscal policy changes that are not yet known as of today, are unlikely to be implemented before If a higher surplus were to loom, we assume that taxes will be cut to bring the budget back toward the two percent ceiling.

The adjusted primary surplus as defined in the previous paragraph is therefore taken to be whichever is the lower of either the estimate, or the level that is required to generate a headline surplus of no more than two percent of GDP. Semisovereignty Challenged 9 model of semisovereign governance is reflected in the fact that Germany is included almost by right in any significant study of comparative government and governance e. Lane and Ersson ; Pierre and Peters , especially p. Indeed, in , and , real GDP effectively ground to a halt, with growth rates of just 0. When combined with an increasingly ageing population and a sharp rise in early retirements , plus a long-term decline in the birth rate, this has contributed to a rapid increase in social expenditure, including unemployment benefit, health and pension costs, which has jumped from Higher welfare expenditure has also impacted on the cost of labour in Germany: The volume of red tape and bureaucracy, which had baffled outside observers of West Germany even before unification, has reached almost epidemic proportions since 4 Unless otherwise stated, all economic data are taken from the Statistisches Bundesamt http: Paterson , with over 3, legislative acts passed by the federal level alone between and Der Spiegel, 21 September This has given a sense of urgency to the question of what if any reforms might be needed to the structures of Modell Deutschland.

However, so far, progress has been painfully slow. Since the late s, notably pre-dating the change of government in , commentators have been lining up to berate the sclerosis that was perceived to have gripped the German public policy agenda: Thus, already in , the term Reformstau reform blockage was the word of the year for the Society for the German Language. Academic and non-academic commentators too have highlighted the parlous economic situation in which Germany currently finds itself e.

Padgett ; Kitschelt and Streeck a; also Steingart The long-term implications of slowing birth rates in West Germany had also already been the subject of lively public debate in the mids. At the end of the s, Bulmer and Humphreys , p. Perhaps most presciently, given the nature of political conflicts in recent years, Manfred Schmidt in summarised the problems of co-operative federalism thus: As it was, unification the following year set off an unprecedented period of sustained drain on resources and thereby on German macro-economic policy.

The Economist, 7 December With most of the transfers being spent on consumption rather than investment, unification has arguably resulted in one of the biggest statefinanced consumer spending sprees in history. Yet perhaps surprisingly, no party has seriously questioned these fiscal transfers.

Two reasons may be identified for this. First, the creation of equality of living conditions across the country remains a constitutionally defined policy goal. Second, as is discussed below, eastern German voters are more likely than their western counterparts to switch parties between elections, thereby making a reduction in net transfers electorally extremely hazardous. Crucially, the massive exercise in Keynesian deficit spending represented by unification has so far been slow to produce much in the way of 12 Simon Green and William E.

Paterson results, principally because eastern productivity levels remain too low to justify the wage settlements achieved by western unions in the immediate aftermath of unification. Accordingly, the east remains economically weak, and its real GDP, despite growing rapidly in the early s, has since stagnated. Significantly, the early increases in real GDP failed to produce increases in employment in the east, where average unemployment, excluding work-creation measures, was But public finances have not been the only area in which unification has had a major impact.

However, with the glaring imbalance between wages and productivity in the east, many employers there have withdrawn from such agreements, paving the way for more flexible wage settlements. Even the state is contributing to this trend: In terms of institutions, too, unification has brought about changes. Semisovereignty Challenged 13 still less than 75 per cent of that of the poorest western state Lower Saxony Rudzio , p. But parties, too, have found it difficult to adapt to the changed circumstances of post-unification Germany. As a result, voters in Germany, but especially in the east, have shown a remarkable propensity to change their allegiances from one election to another.

This feature was particularly important in every Bundestag election since It is arguably no surprise that saw the first election to produce a complete change of government in Germany since cf. This trend has been compounded by fundamental differences in the structure of the party system between west and east. By contrast, the party landscape in the east has consisted of three moreor-less equal players: Such changes in the structures of party competition 14 Simon Green and William E. Paterson theoretically make it harder for the two larger Volksparteien to act as integrating forces cf.

The s saw a proliferation of possible coalition permutations at sub-national level outside the standard government—opposition split at federal level. Finally, parapublic institutions too have changed. Although the ECB, as noted above, is overtly modelled on the Bundesbank and is even located in the same city , its responsibility is of course for the entire euro—zone, in which Germany in was just one of twelve members. A significant component of the semisovereign state has, therefore, been Europeanised. Third, there was a general trend to privatisation during the s, especially in the former state-owned telecommunications and rail industries.

The cumulative effect of these changes on the operation of semisovereignty is discussed by Andreas Busch in chapter 5. Demands on Germany to Introduction: Thus, large and medium-sized German companies famously not only financed, but also, in the case of larger firms, held stakes in each other. The resulting insulation from global capital markets protected firms from having to maximise returns in the short term. This, of course, also benefited the social market economy, in which the principle of equal contributions by both employers and employees to the welfare funds was well established and, in the absence of global competitive pressures, affordable.

The degree to which Germany is now embedded in the global economy was graphically illustrated in the aftermath of the terrorist attacks of 11 September , which helped end the tentative economic recovery that had begun the previous year. Today, joint German—US conglomerates e. In terms of semisovereignty, this trend has meant that the incentive for German capital to bear the high costs of the social market economy is decreasing cf.

Significantly, the option of capital flight is not available to many small and medium-sized enterprises the Mittelstand , which account for the majority of employment in Germany. In the current German system, many such companies are simply resigned to a constant struggle to remain competitive internationally. From Asset to Liability? Overall, post-unification Germany has been caught in a complex web of interrelated endogenous and exogenous factors, which have combined to create a serious challenge to the future viability of Modell Deutschland.

On the face of it, things do not look good for the semisovereign model of governance. More importantly, election-free periods following a federal poll, when national governments would normally push through their most unpopular proposals in the hope that the voters will have forgiven them by the time of the next election, are even rarer. When combined with well-established trends in public opinion, which show that voters support reforms, as long as they do not affect their own individual situations, the main political parties have for many years been reluctant to grasp the nettle and make potentially unpopular decisions, most of which would have involved zero-sum re-distributive dynamics.

As such, this is not surprising: On top of that, opposition parties have a range of options open to them in order to veto proposals, ranging from organising a Bundesrat blockade to taking the law before the Constitutional Court and, in the case of citizenship policy, even organising a highly controversial petition campaign.

The deep problems that Germany has had in tackling the economic and structural challenges of unification raise an important point. Yet the current situation, in which the political incentives to undertake major reforms are very low, prompts a new question, as posed by Wolfgang Streeck in chapter 7: This question is highly germane for the future viability of semisovereignty as a model of comparative governance.

If Germany is to remain a point of reference in international comparisons, its structures of governance must find a way of taking decisions which help reverse its economic under-performance of recent years. More importantly, the question is also of huge relevance for Germany itself. It currently faces a situation in 18 Simon Green and William E. At least part of the problem surely lies in the fact that Germans have found it understandably difficult to part with a successful model, as opposed to parting, as they did in , with a model that had so patently failed.

Here parallels may be drawn with the experience in recent years of Japan, as the other main defeated power in which achieved unparalleled economic success during the second half of the twentieth century only to find that this became unsustainable during the s. Kitschelt and Streeck b, pp. As The Economist asked after the federal election: But can they still deliver the goods? That said, it should by no means be taken for granted that semisovereignty, or for that matter the Rhineland model of capitalism, is doomed to failure Hall and Soskice The recent experience of Japan, where reform has been followed by a degree of economic recovery, indicates that it is possible to escape from the high equilibrium trap.

As noted above, Katzenstein in his original analysis was at pains to emphasise that incremental change does not equal immobilism. Significant decisions, notably unification and membership of the euro, are still possible. The key question is whether semisovereignty is by itself capable of translating its default tendency towards incremental outcomes into more far-reaching, path-defining changes both in terms of entire policy fields and the institutions that govern them.

Even though its failure in December constitutes a blow to attempts to streamline decisionmaking in the German polity, there can be little doubt that this setback is Introduction: Semisovereignty Challenged 19 temporary and that there will be renewed political initiatives to take this agenda forward in the near future. Future generations of political and business leaders will quite simply not be weighed down by the shadows of the past, although they will continue to find it difficult to recalibrate the policy and institutional mix, which for so long provided unparalleled success, to meet the changed terms of international competition.

This volume, then, brings together a range of contributions to examine the applicability and future viability of semisovereign governance in Germany in detail. Its main focus lies on events from unification up to the federal election, although subsequent events, including the development of Agenda up to mid, will also be addressed.

The analysis is divided into two parts. First, Wade Jacoby in chapter 2 considers the process of institutional transfer to the east, thereby showing how semisovereignty itself helped burden the federal government with massive financial commitments. In chapters 3, 4 and 5, Thomas Saalfeld, Charlie Jeffery and Andreas Busch respectively then examine the development of each of the three policy-making nodes, namely political parties, federalism and parapublic institutions.

In the second part of the book, individual policy case studies are analysed along the lines originally employed by Katzenstein, who structured his discussion under the headings of context, agenda, process and consequences. Of the six original case studies, one university reform is not re-examined here, as its relevance it was originally included as an example of co-operative federalism has diminished in recent years.

The remaining five original areas economic management, industrial relations, social policy, immigration and administrative reform are examined by Kenneth Dyson, Wolfgang Streeck, Roland Czada, Simon Green and Klaus Goetz in chapters 6—9 and 11 respectively. They are supplemented by studies of two new fields, environmental policy chapter 10 by Charles Lees and European policy-making chapter 12 by William Paterson.

In chapter 13, Peter Katzenstein concludes the volume by providing a re-evaluation of the semisovereign model as a whole in the light of the analysis presented here. The point of departure is the progressive crisis of the state socialist model in the German Democratic Republic GDR , followed by the collapse of the GDR state, and the widespread hope among eastern Germans that their territories might not merely join the Federal Republic but also be remade in its image McAdams ; Maier ; Hampton and Soe It would be unrealistic to ask of a model that highlights incremental change to explain the most rapid period of institutional and policy change in the post-war period.

In that sense, the question here is not so much whether the semisovereignty model predicts or explains the main contours of unification, but rather whether the political features it highlighted — including incrementalism, political bargaining and societal engagement — survived the move to the east. This is no easy question, for there is no one answer valid across all policy domains. Clearly, institutional transfer has resulted in many similarities between the political economies of western and eastern Germany. To do justice to this question, the investigation is limited to three policy areas in eastern Germany: In addition, two other cases wage bargaining and limits on labour migration will be treated much more briefly.

The question, then, is whether semisovereignty, which developed in a particular historical and international context, could be actively transferred to a territory with different historical antecedents and international influences. There is no shortage of works that suggest that such transfer is simply impossible, and that all meaningful institutional developments are organic ones, native to a particular cultural and historical soil e.

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Yet there were powerful political incentives to attempt such a transfer and to persevere when difficulties appeared. And so the West German government did make the attempt. Three themes on institutional transfer deserve initial emphasis and will be illustrated more fully below: In eastern Germany, the search for subsequent solutions involved a combination of more institutional transfer but also of novel experiments that had no real West German antecedents.

But in this search for solutions, the federation Bund was consistently the problem-solver of last resort. Though virtually every actor had strong incentives to solve problems, and some actors had the funds to make a contribution, only the federal government had both the incentives and the resources to stay deeply involved. Variables and Cases In this chapter, the question of whether specific experiments in eastern Germany worked well is investigated in conjunction with two other questions. First, were the old policy instruments in western Germany robust or modest? Second, to what extent could the federation externalise the costs of experimental solutions as opposed to underwriting them itself?

This chapter assumes that when confronted by new Can Semisovereignty be Transferred? Robustness is a rough proxy for problem-solving potential. The semisovereignty model implies that policy innovation is usually incremental in Germany. This chapter defines robust policy instruments as ones that have existed for many years and that represent high levels of financial commitment.

On the one hand, robust instruments might be helpful to politicians trying new experiments because they are well endowed in both human capital and budgetary terms. Thus, they may contain the slack resources and the expertise to try new approaches. On the other hand, if robust instruments equate to robust commitments, they may oblige the state to continue trying to solve problems even when its best attempts do not look promising.

Robust instruments are likely to be a double-edged sword. By contrast, the externalisation challenge allows clearer predictions. If the federation cannot solve a problem, it should try to ensure that voters do not hold it responsible for that problem. The initial presumption is that the German semisovereign state will be quite good at off-loading tasks and externalising costs — far better than, say, historically statist France cf. On balance, the worst situation for the federation is when robust instruments combine with high political salience to lock in its engagement even though externalisation is very difficult.

The easiest externalisation should occur when modest tools exist at the federal level, the voting public accepts this, and a competent and willing third party is available. The first two reflect cases in which the old i. First, in active labour-market policy, the state lacked strong institutions to promote employment Schmidt a. The second case is regional policy, and it is also best seen as modest in terms of existing infrastructure. To be sure, this case displays somewhat more in the way of traditional instruments, as developed especially in the Ruhr since the s.

Yet it is important not to exaggerate the policy tools available to the state, as this policy area had become quite liberalised in the s. As we will see, however, a significant political battle was waged between the state, the Treuhandanstalt THA — the institution charged with overseeing the privatisation of companies formerly owned by the GDR , unions and employers over an eastern German regional policy. In the context of this fight, the federation could externalise many costs on to the supranational level of the European Union EU ; to receive these funds, however, it made important concessions in its rules over regional policy.

After , very little innovation has occurred at all in this area; however, we do see that it was the federal government which provided the money to keep the old system intact.

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Thus, stasis has become very expensive, mostly because the federation has been unable to externalise many of the new costs in light of the electoral incentives to prop up the status quo as expanded to eastern Germany. A fourth policy area, though not considered as a case below, helps complete the initial sketch of variation. While it is beyond the scope of this chapter to give an account of the complex immigration policy debates in Germany see instead chapter 9 in this volume , one political economy aspect of the debate illustrates the thrust of the argument: This deal helped the federal government address fears of labour-market competition in eastern Germany and Bavaria.

It did so, however, by externalising costs onto both the citizens of the aspirant Can Semisovereignty be Transferred? Sovereignty shifts across policy domains: Ukraine whose borders have been hermetically sealed by their western neighbours at some cost in both commerce and political stability Jacoby Here, a robust instrument went hand in hand with externalisation. First, what is the capacity of traditional instruments two were modest; two, robust? Second, what possibilities exist for the federal government to externalise costs in two, very good possibilities existed for it to externalise costs, and in two others it had modest or low possibilities?

In all four all-German elections, the party that won eastern Germany also won the country, including the election where the national margin of victory was a mere 7, votes see Table 2. This pattern gives any party in government the incentive to be the problem-solver of last resort in the region, providing, of course, that such costs cannot easily be externalised. But, as Streeck b has noted, many of these costs have indeed been externalised onto the welfare state. In this case, the burden is borne far more by those employed than by taxpayers.

Details of the significant new exposure of the federal government in this domain that justifies its placement here appear below. Vocational training is an alternative policy area in which historically weak centralstate instruments have been expanded significantly at great cost and without much externalisation of these costs see Jacoby , chapter 6. The Economist, 14 March , p.

The idea has entered the debate about eastern Germany in three different ways. One common usage considers transfer simply as a tool wielded by western German actors to colonise the east — a technique for cutting off indigenous innovation in eastern Germany Unger , pp. But this variant of the concept has two fatal flaws. First, it blends out the enthusiasm — however superficial their knowledge might have been — of eastern Germans for West German institutions. This use, thus, ignores those aspects of transfer that appeared, from the eastern German perspective, to be desirable.

A second approach treats transfer simply as the formal process of establishing institutions and practices in the east e. Other problems may still abound, such arguments run, but the transfer itself was quickly and easily implemented. Here, transfer is narrowed to a purely formal process that consists of one or a few legislative acts or executive decrees in and, perhaps, For example, an excellent study by Robischon et al.

As a result, in all three cases, the state and unification treaties Can Semisovereignty be Transferred? The third approach casts transfer not as colonisation or technocratic rule-making, but as one ideal-type for institutional change. Lehmbruch a reserves the concept to describe only those sectors — such as health care — where West German regulatory governance was extended to eastern Germany. He separates this transfer process from three other modalities of institutional change: It does so for three reasons.

First, it is implausible that some policy areas are shaped only by exogenous processes transfer while others are shaped only by endogenous ones innovation. Rather, in any given sector, one finds a mixture of exogenous and endogenous changes. Finally, the comparative perspective reveals many processes in eastern Germany to be extreme variants of those in other post-Communist states. This chapter, thus, draws on a broader notion of institutional transfer developed in a previous work on the creation of unions, works councils, employer associations, and secondary and vocational schools in eastern Germany Jacoby Three themes from that work are relevant to the current chapter.

For example, even the extraordinarily comprehensive transfer of West German structures has not been able to compensate for the challenges of transferring industrial relations to a new setting. Second, unintended negative consequences abound 28 Wade Jacoby and create new problems for existing actors. Third, these new problems may shift the competencies of key actors because these actors may have different interests in compensating for unexpected institutional failures. In some cases, social partners stepped into the breach — witness the wellnigh frenetic activity of some unions in eastern Germany — but, in many cases, only the federal government had both the incentives and the resources to build new programmes.

One specific set of unintended consequences will be of special relevance below: The resulting unemployment cost trade unions dearly in terms of employed membership. The two social partners, which represent ever smaller shares of capital and labour in eastern Germany, have thus had considerable difficulty defending the integrity of their core mission: Informal deals abound in which employers pay less than contract wages with the complicity of the works councils; this also strains ties between unions and the works councils concerned Jacoby Moreover, the situation is not getting appreciably better.

Productivity has remained at about two-thirds of western levels since Bach et al. Given the significant problems in the wake of institutional transfer, what steps has the federal government taken to shore up, invent or abandon particular policy instruments? Obviously, a full inventory of institutional transfer is beyond the scope of this chapter.

The next three sections do, however, present case studies that show a range of efforts by the federation to externalise the costs of adjustment in eastern Germany. We start with a case in which it had only an intermediate level of success financing active labour-market policies , move next to a case of reasonably high externalisation financing regional development policy , and conclude with an abject failure of externalisation financing tax 3 Eastern wages remain, even to this day, below those in the west.

In the first two cases, externalisation efforts rested on historically modest policy instruments, while in the final case, the instruments were quite robust. From Crutches to Pillars Though eastern Germany lost 3. This huge gap between actual job losses and official unemployment can be accounted for by the range of labour-market policies that were transferred to the east. Thus, institutional transfer in one area — industrial relations — helped drive huge labour-market problems that were addressed, in part, by the transfer, and then expansion, of relatively minor West German policy instruments.

In addition, various actors also created new instruments. In eastern Germany after , this pattern did not hold — a situation made possible only by heavy subsidisation of active measures by both the BA and the federal government Knuth Early on, the BA bore the brunt of the new costs, and here the federation was indeed able to externalise some significant costs. In , for example, the BA covered two-thirds of the extra costs and the federal government one-third, but as the programmes grew, so, too, did state exposure. Another parapublic agency, the Treuhandanstalt, also helped insulate the state from blame, as it was a perennial target of animosity.

See chapter 5 in this volume, p. In addition, for every hundred unemployed persons in the east in , there were also ten workers on retraining programmes. When all active measures are combined, twenty-four workers were on active programmes in the east for every hundred persons who were unemployed. Since , there have been four key programmes designed to absorb potential workers. This initial impression contains an important element of truth, but it must be amended to note that one programme — short-term work — had a relatively brief moment on the stage, and has since dwindled to become very small, while another programme — special early retirement programmes for the east — ended entirely in In other words, not all crutches became pillars, for some were, indeed, phased out though the standard early retirement programmes have continued in the east at great additional cost.

On the other hand, the two other crutches — retraining and employment promotion — have become pillars, and both are active measures. This programme allowed the state to subsidise wage costs up to the level that the BA would pay in unemployment benefits. If the pattern of expanding historically modest policy instruments is plausible, we need to look outside the narrow eastern German context for the data on externalising costs. Most costs borne by the federation come not from funding new programmes directly though some of this occurs , but from covering BA deficits.

For this reason, it is important 6 Note therefore that the measures that involve large numbers of people have more space between the lines on Figures 2. BA deficits can be incurred in the west as well as the east, and, clearly, we can see trends towards new active labour-market instruments in the west as well. By , all-German labour-market schemes covered about 1. With its electoral reputation purportedly riding on the reduction of unemployment though its failure to reduce unemployment significantly did not cost it the election , control was something the re-elected government could not do without, even if that control came at a price.

So, while the insurance funds administered by the BA are typically financed by equal employer and employee contributions, federal subsidies now make up a very substantial overall contribution to the total BA budget — in it was about 30 per cent of total spending Vail , p. Thus, the expansion of active policies in the east has now linked up with the growth of the role of the state in a reforming parapublic institution. What are the contours of this increasing state role? It also required the recipients of unemployment benefits actively to seek work or to face, after twelve weeks, the termination of benefits.

One fascinating aspect of this programme is that state leverage increases in that it orders the BA to change policies , but in a manner designed to decrease BA and, thus, state costs. At the same time, as Streeck b has pointed out, many towns in the east rely heavily on labour loaned to them by the local Arbeitsamt, or employment office, to carry out vital functions.

Of the remaining costs, however, 90 per cent were covered by federal revenues primarily through the Federal Ministry of Economics and Labour , and not through the BA. Third, total federal spending on labour-market policies is substantial; it is also rising. During — when the total number of unemployed persons dropped by , all net gain was in the west — the federation spent more than ever on active labour-market policies DM Finally, the government has passed laws allowing workers in firms with fifteen or more employees to shift unilaterally their full-time job to a part-time one.

Many firms objected to this perceived intrusion of the state into the domain of employment bargaining. In addition, the new co-determination law relaxed procedures whereby workers can establish works councils. The upshot of these trends in eastern Germany, in conjunction with changes in the west, is that the state does seem to be playing a more significant role both in the funding of active labour-market policies and in shifting the rules and regulations of labour markets in some novel ways.

Modest policy instruments have become much more widely used. New Rules for New Money One of the great ironies of unification is that a state that traditionally had low public employment in spite of high state spending Schmidt a came, overnight, to own an entire economy. In order to make rapid privatisation politically sustainable, the state found it had to support the promise of equal wages in east and west. Yet rising wages in the east made investment there less attractive; even greatly depressed Treuhandanstalt asset prices could not lure sufficient investors Sinn and Sinn The state, it became clear, would have to help promote investment.

Yet the main regionalpolicy instrument in Germany, the Gemeinschaftsaufgabe Verbesserung der regionalen Wirtschaftsstruktur GRW , was quite restrictive in the activities it would fund. Could the transfer of West German regional-policy structures compensate for problems that accompanied the transfer of the western wage-bargaining system?

If not, could innovation in regional policy help? The federation could significantly externalise costs, but only if it agreed to change its rules. Second, the GRW focused on export-driven growth, and so tended to support large firms Conzelmann , p. In response, two developments require emphasis. First, the unions began a campaign to promote a regional policy focused on restructuring old GDR firms. The rest of this section covers each in turn. Besides an existing policy mix geared towards promoting large firms and export-led growth, there were other inauspicious bases for an eastern German regional policy.

Social actors were weak and firm boundaries were still unclear, so there was little pressure from inside eastern Germany to force early state attention to regional policies. Western German corporate interests were generally aligned towards preventing the growth of a large state-subsidised economy in the east.

Moreover, given sectoral overcapacity, few had strong incentives to invest there. The preferred initial strategy of most western firms was to acquire the best industrial and real-estate assets at modest prices and then to favour state subsidies for individual worker retraining over subsidies for remaining state firms. As noted above, the precondition of this strategy was the acceptance by the eastern German population of positions in training and the secondary labour market.

The Treuhandanstalt used union involvement with the employment and training companies to diminish protest while successfully resisting union calls for structural or regional policy Knuth In the early period after unification, the unions issued many calls for coherent regional and industrial policies, but they appeared to devote few resources to developing them Karrasch As job losses continued and new investment remained low, however, the unions began to pitch a more activist policy to the THA and Land governments.

While early developments brought unions many new members, job losses meant membership losses and, ultimately, organisational weakness.

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