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The Capacity to Reform: Germany and Slovakia

The Capacity to Reform: Germany and Slovakia. Wolfgang Merkel Science Center Berlin/ Humboldt University Bratislava 6/3/2008. Comparing Germany and Slovakia?. Commonalities: Consolidated democracies EU-member states Coalition governments Differences: Econ. Development Euro Zone Size?

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The Capacity to Reform: Germany and Slovakia

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  1. The Capacity to Reform:Germany and Slovakia Wolfgang Merkel Science Center Berlin/ Humboldt University Bratislava 6/3/2008

  2. Comparing Germany and Slovakia? Commonalities: • Consolidated democracies • EU-member states • Coalition governments Differences: • Econ. Development • Euro Zone • Size? • Entrenched/new welfare state

  3. Reform Drivers • Callenges: • loss of competitiveness • Societal challenges • Pressure from the electoral market • Strong agenda setter • EU requirements (Aquis; Eurozone) • EU: deregulation pressure

  4. Reforms: Structure and Action • Structure • Constraints and Opportunities • Corridor for Action • Legacies and Institutions • Action • Reform will of the actor • Cohesiveness of the actor/ government • Vetoplayers

  5. Political framework of governmental action

  6. Vetoplayers: Definition • “individual or collective actors whose agreement is required for a change in the status quo” (Tsebelis). • Two categories of veto players • institutions (institutional veto players) • and parties (partisan veto players).

  7. 3 Rules for VP • The higher the number of veto player, the lower the probability that the status quo will change (small winset). • The greater the ideological and programmatic distance between the veto players the more improbable a change in the status quo (small winset). • The higher the internal cohesion of the collective veto players, the better they are able to use their veto power against a change in the status quo (small winset)

  8. Degree of Changes • 1rst Order Change: New Adjustment of Existing Instruments (cut in unempl.-benefits) • 2nd Order Change: New Instruments, New Programs (deregulation of LM) • 3rd Order Change: Partial Change of Goals (neoliberal growth policy) Peter Hall

  9. Vetoplayers: Germany • 2nd Chamber: Bundesrat • Länder • Coalition partner • Constitutional court • Strong interest groups • Consensual democracy

  10. Schröder I • Unemployment problem/ social welfare ref. • Strong inst. Vetoplayers • Cohesive Coalition • Intraparty concflicts • Hope for business cycle • Weak Leadership • Minor reforms • Problem not solved

  11. Schröder II • Strong instit. VPs • Strong leadership • Convincing the opposition (BR) (new winset) • Major reforms: labour market/ social welfare • Dynamic growth of jobs • Increasing problem within own party • Price: new elections 2005

  12. Merkel I • Less instit. VPs (BR) (bigger winset) • Grand Coalition • Incohesive coalition • Strong intra coalition competition • Partner: rational vote seekers • Minor reforms • Risk: reform stalemate and loss of renewed economic dynamism

  13. VPs in Slovakia • No powerful institutional VPs • Centralist state • Favourable instit. Framework for reforms • Problem: Party System >> het. Coalitions • Potentially powerful partisan VPs

  14. Dzurinda I • No second chamber • No CC intervening in policy making • Weak interest groups • Strong partisan VPs • Heterogenous coalition • Inexperienced bureaucracy • Despite strong reform will • Only first order changes

  15. Dzurinda II • Strong reform will • Little institutional VPs • More cohesive coalition • Strong leadership • More experienced administration • Blueprints delivering think tank • Major Reforms: • Tax Reform • Social Insurance Reforms (Pensions) • Health Reforms • Cuts in social welfare

  16. Fico 2006: .... • Little inst. VPS • Non cohesive coalition • Moderate reform will • Less experienced bureaucracy • Constraints by the electorate (pensions) • Some social corrections (2nd Pension Pillar; Health fees) • Challenge: to keep econ.dynamic & create more social cohesion • But: goal > EMU

  17. Renewed priorities of Lisbon Strategy • Investing in people and modernizing labor markets, • Improving business environment • growth of small and medium enterprises (SMEs) to create nine out of ten new jobs. • 3. Investing in education, • 4. R&D and innovation, • foster free movement of knowledge, the creation of a European Research Area and an integrated patent jurisdiction. • 5. Social Cohesion • Problem of hard and soft Europ. law • 6. On energy and climate change – MSs to complete the internal market for energy

  18. Lisbon Goals: Performance Source: OECD.Stat, average values 1998 till 2007 respectively till most recent year available

  19. BRI-Scores: Management Index: 2005-2007

  20. Challenges ahead: Slovakia • Sustainable growth • Investing into people (econ. and social dividends; life chances) • More employment • Diversifying a strong industr. Sector • Complementing it with an advanced service sector (IT) • R & D • Fighting corruption (49. out of 162) • Joining the EMU

  21. Challenges ahead:Germany • Stimulation growth/ domestic demand • Reforming the labour market • Reforming the social insurance system • Investing in education • More women into the labour market • Boosting qualified employment • Integration of migrants • Grand Coalition: doubts on the reform capacity

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