GERMANY IS to propose special low-tax economic zones in crisis-hit euro zone countries to promote growth.
The plan, seen by Der Spiegel news magazine, also proposes setting up national privatisation agencies similar to the “Treuhand” that operated in eastern Germany after unification. The Treuhandanstalt, to give it its full name, was the German state agency that oversaw the restructuring and privatisation of East German enterprises after reunification in 1990. It ceased operating in 1994.
The new plan is being devised as an alternative to growth proposals by French president François Hollande, which have put Berlin under pressure.
According to the document, special economic zones in crisis countries could attract investors with the promise of lower taxes and a lighter regulation regime.
Further proposals in the document involve introducing German-style vocational training for young people, combining theoretical study with part-time practical work.
Ahead of next month’s EU summit, Berlin is anxious to help shape the growth debate in Europe beyond proposals for euro bonds, emanating from Paris.
EU leaders have already discussed plans to improve labour market mobility – linking one country’s jobless with empty positions in another. The plan is to either link up existing national labour offices or create a new pan-European agency.
In this vein, Germany wants to see other countries follow its labour market reforms of the last decade, opening up protected professions, lowering nonwage costs and liberalising hire-fire laws.
This was highly controversial in Germany but, advocates say, crucial in driving down unemployment to a record postunification low of 7 per cent.
Discussing such radical labour reforms around Europe could turn up the political heat on Mr Hollande ahead of next month’s parliamentary elections in France.
National privatisation agencies would likely to be similarly controversial. Germany’s Treuhand agency is highly unpopular to this day in eastern regions for its radical privatisation programme that sold off assets belonging to the vanished socialist state, shuttering hundreds of factories for which no buyer could be found.
In Dublin, the Government was reserved about the reported plans in Berlin, declining to comment in detail while pointing out tax remains an issue for member states.
On privatisation, the EU-IMF troika has acknowledged the Government has made all its timelines regarding sales.
It has also put in place NewERA, to provide advice and guidelines on state asset sales. Control of the assets, and their sale, remains with the Government.
Many of the the reported German measures – particularly the privatisation proposal – appear aimed at bringing some momentum into reform measures in Greece. Germans are increasingly sceptical about Greece’s euro zone membership, with 60 per cent opposed to it remaining in the bloc, up from 49 per cent last November.
Yesterday, Deutsche Bank’s incoming chairman, Jürgen Fitschen, described Greece as a “failed state”.
Meanwhile, Germany’s opposition Social Democratic Party will withhold its crucial parliamentary support to ratify the fiscal treaty unless a fully fledged financial transaction tax is “guaranteed” by the EU in the coming weeks.
“Without taxing financial markets, without increasing investment and without increasing the capital of the European Investment Bank, the SPD will not follow the government,” said Frank-Walter Steinmeier, SPD floor leader.
