By Silvia Bolgherini

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Extra resources for Germany after the Grand Coalition: Governance and Politics in a Turbulent Environment

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Finally, it was also very hard to deny the importance of a swift and extensive response to the worst economic crisis Germany had seen in its post-war history. In sum, when a reform was undisputedly needed, the Grand Coalition promptly showed its ability and willingness to adopt broad and sometimes even unpopular acts. The urgency of structural reforms in economic and social policy decreased from 2006 onward, when the economic situation improved substantially and unemployment started to fall. Therefore, such reforms seemed less necessary and were postponed.

13 On the other hand, Höreth (2007) sees a rather limited effect, estimating that the legislation share calling for the Bundesrat consent dropped no more than five percentage points. How can we best address the 2006 federalism reform effect on the Bundesrat role while the Grand Coalition was in office? Limited Veto Rights of the Bundesrat First, we will look at the aftermath of the modifications of Article 84 Basic Law concerning federal laws containing administrative stipulations. Georgii and Borhanian (2006) were overly optimistic in assuming that the federal government would not use its power to declare administrative provisions in federal laws mandatory, triggering the Bundesrat approval.

The most important law concerning tax policy was certainly the business tax reform, which was passed in 2007. This reform aimed at improving Germany’s competitive position in regard to business taxation (cf. SVR 2007, para. , for more details). The centerpiece was the reduction of the corporate tax rate from 25 percent to 15 percent. Because German companies pay corporate taxes, local business taxes (Gewerbesteuer), as well as a surcharge on corporate taxes, the overall business tax rate is significantly higher than the corporate tax rate alone.

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