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Health Levy Divides German Coalition

Wednesday, March 3, 2010

Germany’s coalition government is once again divided: this time as to whether or not a standard health care levy should be introduced as part of the country’s system of legal health insurance.

Leader of the Christian Social Union (CSU) Horst Seehofer recently threatened to veto the government’s plans, announcing that he will not agree to replace the existing contributions scheme, linked to wages, with a standard health care levy.

Defending the proposal however, Volker Kauder, parliamentary leader of the Christian Democratic Union (CDU) party, emphasized the need to implement a health care premium, explaining that this was agreed as part of the coalition agreement.

German Chancellor Angela Merkel has also provided her support for Health Minister Philipp Rösler, championing the initiative on behalf of the Free Democratic Party (FDP), and has urged the coalition to put an end to the futile bickering and feuding, and to allow the government’s commission time to carry out its role.

CSU leader Horst Seehofer and Bavaria’s own Health Minister Markus Söder have openly expressed their opposition to the government’s proposals on a number of occasions. Indeed, according to CSU calculations, a levy of around EUR145 would cost the government in the region of EUR21bn.

Under the current proposal, a standard legal health insurance contribution would be imposed on all individuals in Germany, irrespective of their earnings. But to redress the obvious social imbalance, a subsidy would be provided from state tax revenue.

Given the record debt in Germany at the moment, however, this proposal does appear somewhat unrealistic. Even Germany’s Finance Minister Wolfgang Schäuble believes that this would lead to unavoidable increases in taxation – and possibly to a rise in the top rate of income tax to as much as 73%.

The government’s commission is due to present its proposals in the summer, in order that the anticipated reform can take effect from 2011.