Germany deadlocked over major welfare reform

The German government's plans for a major reform of the social welfare system have been blocked by the opposition conservative alliance of the Christian Democratic Union (CDU) and the Christian Social Union (CSU).

In an unusual move, the conservative-led state governments in the upper house of Germany's parliament, the Bundesrat, on Monday abstained in voting on the new proposal for "Bürgergeld" (literally "citizen's money"), which was to replace Germany's existing unemployment benefit, known colloquially as "Hartz IV," in January 2023.

The Bürgergeld proposal passed the main German parliament, the Bundestag, last week with the votes of Chancellor Olaf Scholz's center-left coalition government, made up of Social Democrats (SPD), Greens, and the neoliberal Free Democrats (FDP). Monday's block means the government and opposition would need to find a compromise.

A bitter contest

Bürgergeld, hailed by the Labor Ministry as one of the Scholz administration's boldest reform plans, is intended to raise basic welfare payments and ease sanctions imposed on the unemployed. It is an overhaul of the Hartz IV system that the last SPD government, under Gerhard Schröder, instituted in 2002, and which proved decisive enough to split the center-left party.

At the time, Germany had an unemployment rate of more than 10%. But the challenges of the job market are very different today: Unemployment just tops 5% with many industries short on skilled labor. The government is hoping that the new measures will encourage more people to retrain.

The ideological conflict over the new measure, clear for a while, had become increasingly bitter over recent weeks: For the CDU/CSU, the Bürgergeld reforms mean abandoning the principle of "supporting and challenging" — a carrot-and-stick approach to getting people back to work, which many saw as the central innovation of Hartz IV.

For Germany's social welfare organizations, which represent the interests of the country's poorest, the reform is long overdue and barely adequate to cover inflation and the rising cost of food.

Markus Söder, the head of the CSU, tweeted that the Bürgergeld was "a completely wrong signal."

"It is socially unjust and places those who work hard at a disadvantage. For us it is clear: Achievement must pay off!"

A friendlier welfare system

The Bürgergeld reforms envisioned by the government include various plans, the most urgent of which is a €53 increase in the base monthly welfare payment, to €502 ($519). This represents just more than Germany's current inflation rate of 10%.

For some this is far too modest — the socialist Left Party has called for a monthly increase of €200 — but it generally is the least contentious part of the reform. The CDU/CSU has already agreed that a raise is necessary.

The conservatives remain vehemently opposed to other parts of the Bürgergeld law. Under the planned reform, the amount of money that a welfare recipient would allowed to own in "protected assets" would increase to €60,000, plus €30,000 for each additional dependent member of the household.

Under Hartz IV, that limit is much lower. A welfare recipient could retain €150 of protected assets per year of their age: So a 50-year-old, for example, could only keep a maximum of €7,500 before benefits are reduced.

Similarly, benefit cuts for recipients who have not met the emplyment agency's conditions are to be softened: The first six months of Bürgergeld would count as a "period of trust," during which time payments may not be reduced even if the recipient fails to appear at appointments.

The sanctions under the Hartz IV system are tougher (though many had been suspended during the COVID-19 pandemic).

Another reform would see an end to the limits on the size of the apartment that someone on benefits could live in, meaning that people could not be forced to leave their homes if they became unemployed.

For the government, such reforms are meant to protect "the dignity of the individual."

But for CDU leader Friedrich Merz, the Bürgergeld plan is a "complete systemic change in labor market policy." Merz told the Welt am Sonntag newspaper that the Bürgergeld was a "path to an unconditional basic income paid for by tax money," before adding that he saw little room for compromise with the government.

Ulrich von Alemann, a professor of political science at Düsseldorf University, questioned whether the reform was as far-reaching as Merz claimed.

"It's true that the principle of 'support and demand' is being weakened a little, because that was criticized a lot in the past," he told DW. "But it's not being given up altogether."

"Of course, there are still mechanisms that apply controls in the new reform. The original idea of Hartz IV is still recognizable."

'It comes down to money: A little more, a little less'

Whatever Merz says, a compromise is exactly what the government now has to find: The conservative blockade in the Bundesrat means that a "mediation committee" will be formed between the federal government and the states.

"We need readiness for that on all sides," Green Party parliamentary leader Britta Hasselmann said in a statement on Monday. "It doesn't help to talk about the low potential for agreement, as Friedrich Merz does. It's much more important that the focus is on coming together in the interests of people affected."

On Deutschlandfunk, Labor Minister Hubertus Heil said, "I fundamentally reject the idea that ... we are pitting needy people against low-earners."

"We have to ensure that work pays, but we have to keep an eye on society as a whole, including those at risk of poverty. And that's why this reform of the citizen's income is an important step."

A rare impasse

Some would argue that the CDU's plan in blocking this reform is an attempt to test the strength of Scholz's coalition allies: The FDP, as a party of small government, is ideologically much closer to the CDU than the SPD and the Greens. So far, though, there has been no sign of a split over the issue in government.

Still, Germans are not used to seeing government plans being blocked by parliamentary gridlock, partly because for three of Angela Merkel's four governments, her CDU governed together with the SPD. This meant that, because of the makeup of the state governments, it was virtually impossible for the other parties to find the votes to hinder any government laws in the Bundesrat.

But historically that was an exception, not a rule: In the past, Germany has seen plenty of parliamentary gridlock, not unlike those common in the US Congress.

"In those days, for example under Chancellor Helmut Kohl, there were serious blockades in the Bundesrat, with spectacular night sessions of mediation committees attempting to find last-minute compromises," said von Alemann.

But he doesn't think Germany is facing a new era of confrontational democracy. "The Bundesrat is such a patchwork that it will rarely be able to form an effective opposition," he concluded.

"This is more of an exception, I think."

Edited by: Sonya Angelica Diehn

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