Institute of European Studies

The first coalition government in Germany between Social Democrats and Greens aimed primarily at reform legislation in a series of policies. This paper examines three policy areas of direct concern to business – job creation, codetermination, and tax policy. It argues that the coalition suffered an initial defeat in job creation and then settled into a de facto strategy of incremental reform through experimentation in the areas of codetermination and tax policy. This strategy resulted from tensions rather than agreement between the coalition partners. While the Social Democrats pressured organized business and organized labor toward compromise, the Greens wanted to undermine the encompassing control of these organized groups by bringing a broader set of constituencies into the policy process.