HEALTH "REFORM" SPARKS COALITION CLASH

UNCLAS BERLIN 001893 SIPDIS SIPDIS E.O. 12958: N/A TAGS: PGOV GM SUBJECT: HEALTH "REFORM" SPARKS COALITION CLASH REF: (A) BERLIN 1822 (B) BERLIN 846 ¶1. (U) After weeks of internal haggling, in the early morning hours of July 3 Chancellor Merkel announced a compromise agreement on health care reform, designated a top priority in last fall's Coalition Agreement. The reform had been intended to cut medical costs. However, the announced agreement has drawn widespread criticism for its failure to achieve this goal. The Coalition had first sought to shift health care financing from payrolls to tax revenue. However, after a rebellion from CDU/CSU state leaders against the necessary new taxes, the coalition decided instead to raise employee payroll contributions and gradually introduce tax-based financing of health care for children from 2008. There were no structural reforms that would reduce sky-rocketing expenditures and red tape in the system. ¶2. (U) Critical responses, ranging from the disappointed to the outraged, were quick to follow. Federal President Koehler commented that, "laws that are rashly stitched together often create more problems than they solve." From the SPD, Chancellor Merkel has faced charges of weakness and ineffective party management. SPD Bundestag Caucus leader Struck: "Apparently she had to give in to the pressure from the Ministers-President. That must not happen so often again. Really, that shouldn't happen at all." Much editorial comment tends to agree, seeing Merkel weakened and more dependent on the demands of regional party leaders. However, the SPD itself has not emerged unscathed. Within the party, leftists have reportedly been very critical -- to the extent that Struck in one paper is quoted as warning leftist leader Andrea Nahles against giving any "foolish interviews." CDU/CSU leaders have attacked it for presuming that "reform" meant higher taxes and that the CDU/CSU had ever agreed to such an approach. ¶3. (U) How long the political strife will last is unclear -- although hopes that the minimalist outcome would be obscured by World Cup success disappeared when Germany lost in the semi-finals on July 4. One CDU contact was bitter at the public and media, whose expectations that somehow a Grand Coalition would mean grand achievements were never realistic. (He described the outcome as basically leaving current structures untouched so that after the next election the winner could move to introduce their desired reforms.) However, the Chancellor's agenda will move quickly on, first to the President's visit and then to an "Integration Summit," so the public and media will not have much time to linger over the health care story. TIMKEN JR