While the government in Holland is falling apart, the new government coalition in Germany has agreed on its platform for the next four years. A roundup of the German press at the BBC shows that it is not meeting with great enthusiasm. I suppose the situation is not as bad as it might have been, had they implemented all the tax hikes they were talking about earlier. Still, the new government looks like it's going to be more left-wing than its predecessor which contained traces of Third Wayism. The new cabinet is very safe as it won't give Schröder any trouble from within the party, but that's also the problem. The people in charge now are, if anything, even less suited to dealing with the severe economic problems Germany is facing. Just today, finance minister Eichel said that Germany's budget deficit would exceed the 3% norm agreed in the Stability Pact. A massive fine of several billion euro could result, although the political reality of Germany's dominant position in the EU might avert it.

Symptomatic of the new government's plans is the new tax on "speculative" profits. This would affect capital gains made on the "wrong" kinds of investments, such as "plots of land not in own use." This shows the deeply-rooted hostility to free enterprise and risk taking that is at the heart of the German government; trying to punish "wrong kinds" of investment is punishing the risk-taking that is essential to economic growth, and it is going to reduce all investment at a time when Germany's economy is doing very poorly. But importantly, this could also affect shares held in mutual funds (the details are unclear at this time), which would undermine the pensions reform that was passed by the previous government (which consisted of the same parties).

It does not look good for Germany. The government is made up of people who not only don't understand the nature of a free economy, but are in fact hostile to it. Raising taxes, as they are doing now, when the economy is stalled and unemployment hovers around 10% is an act of economic folly. The sick man of Europe's condition is deteriorating slowly. How bad will things have to become before he'll take his medicine? If Japan is anything to go by, it could be a while.