EU executive cracks down on multinational shrimp cartel

German Chancellor Angela Merkel's campaign promise of no new and higher taxes to fund costly campaign promises was central to the coalition talks between her conservative CDU/CSU alliance and the Social Democrats.

As Merkel was able to keep her promise, the two parties, in addition, agreed to stop fresh borrowing to fund government expenditure from 2015. Moreover, cuts to state subsidies for renewable energies - a key conservative demand – were agreed under efforts to rein in runaway electricity prices in Germany.

Controversial minimum wage

More controversial, however, is the introduction of a nationwide minimum wage of 8.50 euros ($11.55) per hour from 2015. Describing the policy as detrimental to the German labor market, Berenberg Bank analyst Christian Schulz said it would also undermine German demands for labor market reforms in the crisis-hit eurozone countries.

'It may not hurt the current economic upswing in Germany, but it will surely hit employment in the next downturn,' he told Reuters news agency.

Gustav Horn, director of economic think tank IMK, said he was more optimistic because a minimum wage would boost domestic consumption. He told Reuters that the move was long overdue and would also lower the risk of old age poverty.

Pension change impact

Part of the coalition treaty was also changes to the German statutory pensions system. The two sides agreed on a minimum pension for people with low incomes, as well as higher pensions for mothers with children born before 1992.

The extra spending would lead to higher social security premiums paid on wages, said Jörg Kramer, Chief Economist with Commerzbank.

'This will have negative effects on business conditions in Germany over the longer term. But it might not hurt German economic growth in the short run which will be higher than in the rest of the eurozone,' he told Reuters.

On balance, German economic experts agreed that the most important news coming out of the the coalition talks had been that Germany would soon have a stable government. Only a few noted that the agreement was still subject to a vote by Social Democrat party members in early December.