FRANKFURT (Reuters) - The coalition agreement hammered out by German Chancellor Angela Merkel’s conservatives and the Social Democratic Party (SPD) will have a wide-ranging impact on business in Europe’s largest economy.
Here’s a breakdown of key initiatives - from taxing Big Tech to use of weed killers - contained in the 177-page pact that still needs to be approved by the SPD rank and file on March 4 before the next government can formally take office.
Although many policy planks represent continuity - the same “grand coalition” ran Germany for the past four years - there are changes that reflect ministerial switches in which the SPD will take over finance and foreign affairs.
The coalition aims to reduce pollution from road and rail traffic by supporting a shift to lower or zero emission vehicles and increasing the use of public transportation and car-sharing.
Pressure has been growing on Germany to enforce clean air limits introduced throughout the European Union in 2010, but it has so far sought ways to reduce pollution without an outright ban on diesel that would be painful for its carmakers Volkswagen (VOWG_p.DE), Daimler and BMW.
The coalition will decide this year on further steps to reduce air pollution from diesel vehicles. Those could include expensive retrofits where “technically and economically justifiable”.
The coalition also plans to ease the tax burden on drivers of electric vehicles, provide at least an additional 100,000 charge points across the country and subsidize car-sharing - but there was no mention of quotas for electric cars.
There are plans to provide funding for research into autonomous driving technology and support the establishment of battery cell production in Germany
The coalition aims to electrify 70 percent of Germany’s vast rail network by 2025 and double the number of rail passengers by 2030. It rejected a privatization of state-owned rail operator Deutsche Bahn. [DBN.UL]
The coalition says the transition to decarbonize, digitize and innovate in power, heat, agriculture and transport must be done in a way that does not endanger business interests.
The target of 65 percent of electricity use to be covered by renewables, a near doubling from current levels, remains the central goal.
The target poses fresh technical challenges and soaring costs that could affect grid technology companies like TenneT, Siemens and ABB.
There is a commitment to expand network infrastructure, which is behind by years, reform grid fee charges, and involve citizens in new renewable energy projects to create acceptance. The government will promote energy storage and combined heat and power generation from green power, and introduce liquefied natural gas infrastructure (LNG) in Germany, a departure from relying on the Netherlands for the handling of imports.
The coalition says it wants to create visibility about how to reduce reliance on fossil fuels to power private cars, public transport and railways. It says all technologies are welcome, including hydrogen derived from renewable sources.
The grand coalition has reiterated its goal of building a ‘gigabit society’, with nationwide ultra-fast broadband internet in place by 2025.
The partners estimate that the government needs to provide 10-12 billion euros ($12-$15 billion) in subsidies which will be covered from the proceeds of auctions of the spectrum for fifth-generation mobile services. Experts estimate the cost of full, nationwide fiber coverage at up to 80 billion euros.
The coalition foresees an open-access regulatory model for glass fiber networks, with a goal of encouraging companies to cooperate in building out digital infrastructure rather than relying on vectoring, a way of upgrading the old copper wire network that reinforces Deutsche Telekom’s advantage as the incumbent. Deutsche Telekom’s competitors Vodafone Telefonica Germany, Liberty Global and Tele Colombus could benefit.
Engineering lobby group VDMA, which represents manufacturing companies who need better internet connections to digitize their business, said the new coalition was “making a mess” of digital infrastructure.
The coalition agreement promises to loosen strict labor laws for highly paid bankers, an effort to make Germany more attractive for financial firms relocating from London as Britain leaves the EU.
It marks a win for banks and could benefit Germany’s Deutsche Bank and other investment banks with plans to move operations to Frankfurt such as Goldman Sachs, UBS and Nomura.
A universal insurance scheme that had been demanded by the SPD and would have gradually replaced private health insurance is not part of the agreement, which should come as a relief to insurers such as Allianz, Munich Re and Talanx.
Insurers also see an opportunity in a scheme backed by SPD leader-designate Andrea Nahles to simplify state-subsidized retirement schemes.
The coalition has stated its intent to tax U.S. Big Tech more aggressively, singling out Google, Apple, Facebook and Amazon by name.
The agreement calls for a common, consolidated EU tax base and minimum rates of taxation to prevent companies from making use of jurisdictions like Ireland or Luxembourg to minimize taxes.
Anticipating these changes, Facebook said in December that it would start booking advertising revenues locally. The pact foresees tough action to make operators of online marketplaces liable if third-party traders evade turnover tax.
German e-commerce firm Zalando, which operates a partner program for independent fashion retailers, said its partner contracts covered this issue, stipulating that they should pay sales taxes in the country an item is sold to.
The coalition agreement says security at airports is the responsibility of the state and it will shoulder more of the costs.
More investment will help airport operator Fraport and airlines such as Lufthansa.
The BDL aviation association said an air transport tax, which brings over 1 billion euros a year to the government, should be removed. Proposals to gradually abolish the tax were dropped during negotiations
The federal government will keep its stake in Cologne/Bonn airport, which the finance ministry had been reviewing.
The agreement calls for opening the much-delayed Berlin airport in 2020, almost a decade after a 2012 opening date was called off with weeks to spare.
The coalition deal includes a goal of ending the use of the weed killer glyphosate within the country but gives no time frame.
Genetically modified (GM) row crops that withstand glyphosate are the main source of cash for Monsanto, which Germany’s Bayer is taking over.
Those seeds are mainly sold in North and South America but a ban on glyphosate in Bayer’s home market would still be a set-back in its struggle to gain wider public acceptance of industrial farming methods.
Other agricultural policies agreed for the new government include a formalization of the current ban on growing GM crops in Germany and an expansion of organic farming.
Help-to-buy schemes will be introduced, rent increases after modernizations will be more limited, rent caps will be made more transparent and the federal government will sell more of its own land to municipalities to increase supply.
The moves to make housing more affordable are seen as more modest than expected and may be positive for residential property-focused companies Deutsche Wohnen, ADO Properties, Grand City Properties and Vonovia.
Reporting by Ilona Wissenbach, Vera Eckert, Douglas Busvine, Tom Sims, Alexander Huebner, Victoria Bryan, Ludwig Burger and Georgina Prodhan; Writing by Douglas Busvine, Maria Sheahan and Georgina Prodhan; Editing by Kirsten Donovan