KEHL AM RHEIN, Germany, Nov. 14 (UPI) -- Germany's main parties Monday endorsed a coalition agreement that has experts worried over the future of the economy.
The conservative alliance of Christian Democratic Union approved the government at a summit in Berlin. Its Bavaria-only sister party, the Christian Social Union, did so in Munich, and the Social Democrats in Karlsruhe.
But several business leaders and senior party members from both camps criticized the deal as one of too many compromises, arguing it will likely fail to spark growth or lower unemployment in the world's third-largest economy.
"The coalition agreement will not make enough of a contribution to support growth and increase employment," Dieter Hundt, the president of the German Employer's Federation, known by its German acronym BDA, said in a statement.
The deal has Angela Merkel becoming the country's first female chancellor. She will officially enter office in a Nov. 22 parliamentary vote. Some conservatives announced their displeasure over the deal, arguing too much of the party's election program had been discarded to make Merkel chancellor. The voices of dissent remained silent Monday, however, as just three of more than 100 members voted against the pact and one abstained.
After what was likely his last speech as the chancellor, party colleagues on Monday in Karlsruhe celebrated outgoing Chancellor Gerhard Schroeder with standing ovations. Franz Muentefering, the future vice chancellor and labor minister of a grand coalition, thanked him for helping to keep his party in government after none of the pre-election polls had given the SPD a real chance.
Schroeder even advertised the idea of a grand coalition, saying it could resolve the partisan politics and affect change.
"This government unmistakably and maybe primarily carries the imprint of the Social Democrats," he said.
Some analysts would agree with Schroeder, as the SPD heaved several of its initial campaign pledges into the 140-page coalition document, such as tax raises for the wealthy and higher unemployment payments for eastern Germans.
But others say the conservatives pushed trough just as many plans, including the controversial measure to raise the country's sales tax by three points from 16 percent to 19 percent. The tax increase is one of the highest in the history of the country -- it could bring in an additional $20 billion in revenues. The measure has business leaders and politica analysts worrying, however, that already weak consumer spending will suffer even more.
"Overall, the coalition deal is mostly about compromises," Ruediger Schmitt-Beck, political expert at Duisburg University, Monday told United Press International in a telephone interview. "Boosting the sales tax is economically at least questionable. Virtually all economic experts have deemed it a negative measure for consumer spending. If the still strong export would also collapse, then the effects could be dramatic."
Commentators compare Germany to Japan, where a 1997 tax increase sparked a collapse of domestic consumption and a financial crisis in entire Asia.
Winfried Fuest, senior finance expert at the German Economy Institute Cologne, Monday told UPI his institute had deemed raising the sales tax raise a positive measure, but only in connection with lowering non-wage labor costs. The conservatives had vowed to do just that. After some coalition horse-trading, however, only one-third of the extra money is supposed to be used. Most of it is needed to fill the many holes in Germany's budget.
Finance Minister Peer Steinbrueck wants to save roughly $41 billion by 2007 to meet the European Union's stability and growth pact, which requires members to keep the deficit below 3 percent of the gross domestic product, a standard Germany will breach for the fourth time in a row.
Even government newcomers like Matthias Platzeck, who on Tuesday will succeed Muentefering as the SPD's leader, are far from euphoric: "What we undertake here is no love affair, but a marriage of conscience."
Amid the criticism, however, a bit of hope shines through. Just as the first grand coalition in the late 1960s, Merkel's team has majorities in both houses of parliament -- that means controversial but important bills will have a much better chance of making it into law.
"What this coalition at least can achieve is the long-overdue federalism reform," Schmitt-Beck said. The reform, which has been tried but failed several times, is set to re-regulate competences between Berlin and Germany's 16 states.
"The federalism reform could make German politics much more efficient," Schmitt-Beck said.
