Germany staging – and perhaps even winning! – the World Cup does not mean that reforms have got sidelined. As a matter of fact, they can’t be sidelined, since the “grand coalition” practically came into existence on the ticket of ending a “reform-jam” by virtue of a big majority in both houses of parliament. And now that the Germans are busy with the World Cup, politicians in Berlin and elsewhere seem to have woken up to the fact that if ever there was a chance of making unpleasant, even painful decisions and getting away with it, then that time was now – with Ballack &co. getting all the limelight and eventually all the flak, in the worst case scenario, God forbid!

The task

After all, Merkel had called Germany “a case for restructuring”, in one of her stronger moments. The restructuring began with another of those unenviable attempts to reduce the budget deficit as well as the public debt, which took the very practicable form of a three percent hike in VAT, this time. – It did not cause a revolution, possibly because the World Cup was just round the corner, as sceptics say.

And then it was the turn of the corporate tax, the complex federal system – an impenetrable jungle of intertwined responsibilities and revenue receipts – and finally, the health care system. The “grand coalition” has gone on the offence in all three, with much dribbling and cross passes from all sides, and a goal hanging in the air. And it had better fall soon, the public’s mood seems to be saying, considering that public approval rating for Merkel’s government on the reforms agenda has fallen from 60 percent to 40 percent in a matter of months. There’s already talk of “frustration”, if not “stagnation”.

The strategy

The ball regarding reducing the health care contributions of employers and workers alike – both pay around 7 percent of the wage packet currently – originally came from the SPD. Merkel was quick to pick it up and found many another CDU state premier on her side.

The trouble is not just where and how to find the extra 30 to 45 billion euros – per year – to plug the gap – between 2008 and 2010, as planned by the SPD, but also the so-called “fund-model”, which involves setting up a central fund into which all health care contributions will flow. Will the private health insurance companies – with their younger and better-earning clientele – have to contribute to this fund, in the name of “solidarity”? Bavarian premier Edmund Stoiber (CSU) doesn’t want to see a “functioning system” like private health insurance breaking down for the sake of charity.

Naturally, the reform of the ailing health care system will not be over with the public subsidy from public tax-money alone, though it might well lower the employee’s and employer’s contribution – which means wage costs - by 3 percent each. There’s the further aspect of how and on what basis the insurance companies will reclaim their costs; free mobility of the insured from the public insurance companies to the private ones; and ultimately, the rising costs of public health in Germany, the superfluity, the wastage, the lobbies involved.

In any case, Merkel has set a deadline for determining the outline of the future health care system: July 7, two days before the final – in the World Cup.

More goals

As regards the other reform projects, the grand coalition is supposed to be nearing a deal on “federalism reform”, the biggest of its kind since the Federal Republic was created. The haggling between the federal government and the states is mainly over control over educational policy – a subject very close to the heart of the Germans, since it involves a fundamental principle of their understanding of democracy. A more subtle but more far-reaching change will be a proposed cut in the number of federal laws that the states can veto – in the “Bundesrat” – a good 60 percent at present.

Ultimately there’s the reform of the German corporate tax regime, supposed to become effective from 2008. The aim is to reduce the total corporate tax load from 38.7 percent at present to slightly below 30 percent. Since corporate tax is a source of revenue for the states and city councils as well, Angela Merkel will need all her courage to take this “courageous step”, as she called it – and then changed it soon enough to her patented “step by step” approach, when she saw just what she was up against.

The score might still be 3:0 for Germany, after all is said and done.