Germany's employers' federation has given a cautiously optimistic response to the reform decisions agreed by the government coalition, with federation president Rainer Dulger describing the package as "an overdue change of course."
"If, however, the coalition's next steps continue in the spirit of this change of course, that would be a good signal for Germany as a business location," Dulger said in Berlin on Thursday, while also criticizing the fact that relief for high performers was not apparent in the package.
The coalition made up of the conservative bloc and centre-left Social Democrats (SPD) had presented earlier on Thursday a 34-point reform package covering tax, employment and cutting red tape.
Dulger described it as an "important message" that would build confidence. For the first time in decades, employment law was being made more flexible, he said, praising the planned expansion of fixed-term contracts without the need for specific justification. "The change of course must become a real economic turnaround."
A change of course was only the beginning, he said. "Now no one must pull the handbrake." Price competitiveness and lower social security contributions had not yet been achieved, he added.
DIHK: Decisions positive overall
The Association of German Chambers of Commerce and Industry (DIHK) also identified rising social security contributions as a disadvantage for Germany as a business location. These and energy costs needed to be urgently addressed, the association said.
Overall, however, the coalition's decisions were positive - with the reduction of red tape in particular described as a "real breakthrough" that in some areas needed to be implemented faster than envisaged in the agreement.
Institute: Coalition reforms step in right direction but 'modest'
The deputy head of economic forecasting at the Kiel Institute for the World Economy (IfW Kiel), Jens Boysen-Hogrefe, said he expects the coalition's reform package to have only a limited impact on economic growth, describing the effects as "modest."
The coalition's plans include greater scope for fixed-term employment contracts and simplified dismissal procedures for high earners on up to just under €15,000 ($17,162) per month. Data protection rules are to be simplified and certain reporting requirements are to be abolished across the board.
Boysen-Hogrefe said the coalition's plans for deregulation and cutting red tape could contribute to growth, but that implementation would be key. The measures were moving in the right direction, he said. "The government is setting off on the journey."
However, he said the flexibilization of the labour market did not go far enough. He also called for more precise details on how the government intends to simplify data protection rules and data sharing. "How the goals are to be achieved and the laws designed remains open - but that is decisive," he said.
The economist said investment in technologies such as artificial intelligence, cloud systems and robotics was necessary, and that better conditions from the state than currently existed were needed to enable this.
Mixed response from unions
The unions gave a mixed response. Yasmin Fahimi, chairwoman of the German Trade Union Confederation (DGB), said: "Many of the results of yesterday's coalition committee are the right signals for employment, growth and relief."
With regard to the agreed tax package, she explicitly welcomed the fact that lower and middle incomes in particular would be specifically strengthened and that tax-free supplements for Sunday and public holiday work were to be increased. However, Fahimi criticized the abolition of telephone sick notes and the introduction of a requirement to provide a doctor's certificate of incapacity for work from the first day of illness, describing it as counterproductive.
The Verdi services union also voiced criticism, with chairman Frank Werneke accusing the coalition of designing key parts of the planned reform package at the expense of workers. "Distrust of employees and an expansion of the fixed-term contract madness do not create growth," he said.
Germany's powerful IG Metall union gave a cautious assessment of the reform package, with union chief Christiane Benner describing the outcome as "a mixed bag."
Benner welcomed the planned tax relief for lower and middle income earners, higher child benefits and the rise in the top rate of tax on high earners. She also viewed positively the measures planned to improve the skills and qualifications of workers, particularly young people.
However, Benner criticized the planned expansion of the option to hire workers on fixed-term contracts without specific justification, and the weakening of dismissal protection, calling them an "attack on employees' rights."
She also said the coalition had granted employers "an antisocial wish list" by abolishing sick notes via telephone and making it mandatory to provide a doctor's certificate of incapacity for work from the first day of illness.
Similar criticism came from Frank Werneke, chairman of the Verdi services union. "Distrust of employees and an expansion of the fixed-term contract madness do not create growth," he said.
Werneke said he regretted that the coalition had shied away from taxing large fortunes and inheritances appropriately. "That prevents an even bigger leap forward on income tax reform," he said.
Farmers warn part-time job reform would be 'unacceptable'
German Farmers' Association President Joachim Rukwied sharply criticized proposals to abolish a specific form of part-time job in its current form, saying at the start of the grain harvest to the south of Berlin on Thursday that such a move would be unacceptable for the agricultural sector.
"We assess the proposal on mini-jobs absolutely negatively," Rukwied said. "Especially in agriculture, alongside the hospitality sector, we depend on mini-job workers."
A mini-job is a type of part-time employment specific to Germany, which allows individuals to earn up to €603 ($690.50) gross per month, or €7,236 per year, without paying income tax or standard social security contributions
They help with the harvest and sowing, he said. "For us they cannot be replaced, and in that respect this means a further burden on agriculture, which is already fighting for survival."
Proposed changes to mini-jobs remain under discussion and have not yet been decided by the ruling coalition.
The abolition of mini-jobs is among the proposals for a pension reform put forward by a government commission.
The commission recommended bringing mini-jobs into the pension insurance system and abolishing their special status under tax and social security law. Exceptions would only be permitted for school pupils under the proposals.
