• 1. Economy and technology
• 2. Labour market
• 3. Education and training
• 4. Research and higher education institutions
• 5. Energy
• 6. Infrastructure - transport, building and housing
• 7. Environment
• 8. Agriculture
• 9. Better regulation

1. Economy and technology

1.1 Economic strategy: new growth, more employment

Germany needs three things: economic rehabilitation, reform and investment. Consolidating the budget and fulfilling the Maastricht deficit criteria by 2007 are essential. Further reforms to the social security systems are needed. Consolidation and reform alone, however, are not enough. Germany needs a growth strategy, linked to considerably greater investment. A central goal of the coalition is to create new growth and more employment for Germany.

Germany must respond proactively to the breakneck pace of global structural change. Time is of the essence, the international competition is not standing still. We need to act quickly. Strengthening the foundations of the social market economy is the prerequisite for new growth and more employment in Germany. For around 10 years economic growth in Germany has been extremely weak. Weak growth is mainly responsible for the appreciable decline in the number of jobs liable to social security contributions.

New growth must therefore be generated and more employment opportunities opened up. Without substantially more growth, it will be impossible to consolidate public finances and the social security systems. Half a percent more growth would create around an extra 2.5 billion euros in tax receipts and around 2.3 billion euros in additional revenue from social insurance contributions. Investment and innovation need to be revived to trigger a new spurt of economic growth; we want to stimulate consumer demand by boosting consumer confidence. This is an absolute economic priority.

Moreover, the CDU, CSU and SPD reached a number of substantive agreements on 10 October 2005 in advance of the negotiations to form a grand coalition (Annex 1).

1.2 Reviving investment activity

If the weak level of investment activity persists, the German economy cannot recover. Reviving investment activity is the key to new economic growth. While the cuts in tax rates in recent years have increased the income of a number of enterprises and their investment ability, the improved earning power has not yet led to adequate domestic investment. The increase in investment capacity must also result in more investment activity. By international comparison we need substantially better terms and conditions with respect to depreciation. Until a reform of corporate taxation comes into effect, more favourable depreciation conditions will be the first step towards creating specific incentives to boost investment activity. Higher depreciation rates are more crucial at this stage to a rapid revival of investment activity than lower tax rates.

Public-Private Partnerships (PPPs) are a promising way of closing deficits in relation to the delivery of public services. Moves to improve the legal framework had already been set in train during the 15th electoral term with the Act to Accelerate the Establishment of PPPs (Gesetz zur Beschleunigung der Umsetzung von Öffentlich Privaten Partnerschaften). The legislation will be amended to continue progress in this direction and abolish further obstacles.

Removing discrimination against PPPs (as contained, for example, in the Hospital Financing Act (Krankenhausfinanzierungsgesetz) and the Social Assistance Act (Sozialhilfegesetz), the Investment Act (Investmentgesetz) and the Private Sector Funding of Trunk Road Construction Act (Fernstraßenbauprivatfinanzierungsgesetz) and creating new legal provisions to ensure that small and medium-sized enterprises, in particular, can also benefit from PPPs are urgent priorities.

1.3 Improved financing for small and medium-sized enterprises (SMEs)

More investment in small and medium-sized enterprises is particularly important since this sector provides around 70% of jobs. As long as the current weak level of investment activity persists, the sector cannot resume its traditional role as the motor of growth and employment. A lack of funding for small and medium-sized enterprises can no longer be allowed to constrict the German economy.

We will therefore launch an SME offensive. We propose in this context to:

• improve depreciation conditions,
• fully maintain the financial support provided by the ERP Special Fund,
• implement Basel II to the advantage of small and medium-sized enterprises, and
• make increased use of new financing instruments.
  

The equity ratio of small and medium-sized enterprises is becoming an increasingly important factor in relation to credit decisions and financing costs. We will therefore further expand the availability of equity capital and equity-equivalent mezzanine capital for SMEs in general. The existing programmes offered by the KfW-Mittelstandsbank (KfW SME Bank) need to be further adapted to the equity needs of small and medium-sized businesses and new programmes developed as appropriate. Further improvements will be made to the general conditions for private equity and venture capital financing.

In order to improve the financing possibilities for small and medium-sized enterprises, we want to reduce the risk for the lending banks by further strengthening the system of guarantee banks and by altering risk distribution with respect to KfW promotional loans to reflect more strongly the higher risk presented by small businesses. To simplify bank lending, we will reduce regulation by the financial supervision bodies to the necessary level. The supervision of the credit industry by the Federal Financial Supervisory Authority (BAFin) is to be evaluated early in 2006 on the basis of an empirical report. The report is to contain an assessment by the market participants and an evaluation of the transition to 100% cost coverage by the banks. The report will be used as a basis to strengthen the legal and technical supervision exercised by the Federal Ministry of Finance and, if appropriate, to introduce cost sharing by the Federal Financial Supervisory Authority in appraisal costs to raise efficiency reserves. The minimum requirements for risk management in credit institutions imposed by the Federal Financial Supervisory Authority (MARisk and MAK) are to be kept as lightweight as possible.

To improve the liquidity of small and medium-sized enterprises, the turnover threshold for VAT liability upon receipt of the invoiced amount rather than at the point in time at which the invoice was issued will be raised. We will make changes to inheritance and gift tax to facilitate business succession.

1.4 Business start-up offensive: encouraging independence

Jobs that are lost as a result of business closures, insolvency and relocations abroad must be replaced by new jobs. The basis for creating new employment are new business start-ups and surges of innovation leading to the development of new products and the opening up of new markets.

A business start-up offensive is needed to help shape a steady and smooth process of structural change and create new employment opportunities. We want to encourage would-be entrepreneurs and to remove the legal obstacles to business start-ups. This applies both to innovative and to conventional new businesses. We need people to have more courage again to become independent. The self-employed rate must rise again to substantially above 10%.

We will create a "one-stop shop" for new businesses, exempt them from duties to provide statistics, and allow them to use simplified profit calculation procedures where turnover does not exceed 500,000 euros, rather than the previous 350,000 euro threshold.

1.5 More money for research and development

We must achieve a competitive advantage in Germany above all through a process of permanent innovation to ensure that while we may be more expensive, we are also that much better. To achieve this aim we must ensure that by 2010 3% of GDP is spent on research and development.

1.6 Mobilising venture capital for innovations

The founders of high-tech companies and young technology businesses need, above all else, venture capital to finance their growth. The venture capital market to finance innovations is conspicuously underdeveloped in Germany. We must therefore make it a priority to create an attractive tax environment for investing in venture capital. Small and medium-sized technology companies are particularly disadvantaged by the restrictions on offsetting losses for tax purposes and also the lowering of the materiality threshold with respect to shareholdings to 1%.

We will improve the capitalisation of small and medium-sized enterprises in particular and create internationally attractive conditions for venture capital.

The KfW-Förderbank (KfW Promotional Bank) will offer more pre-seed and seed funding. With our partners in the private sector we will expand the funds for business founders and young technology companies (particularly the High-tech Start-up Fund, the ERP Start-up Fund, and the EIF/ERP Dachfonds (Fund of Funds)) and examine new instruments to close the strategic gaps in research funding.

1.7 Cluster building and high-innovation flagship projects

Through the increased interlinking of application-based research and innovative development in relation to new products and processes, supported by adequate venture capital, we will ensure that Germany's outstanding scientific potential is used to create new businesses, new products and new, well-paid jobs. Building clusters to take advantage of geographical proximity optimises technology transfer between the scientific community and industry. To support particularly high-profile clusters we will allocate promotional funding on the basis of competitive invitations to tender. The Federal Ministry of Education and Research and the Federal Ministry of Economics and Technology will work closely together to ensure the dovetailing of basic research with application-based research and development. Application-based research establishments will be encouraged to make the maximum commercial use of their knowledge. The "Partners for Innovation" initiative will be continued.

In an action plan entitled "High-tech Strategy - Germany", we will, among other things, give particular priority to strengthening cutting-edge and cross-cutting technologies such as biotechnology/life sciences, materials research, nanotechnology, microsystem technologies, optical technologies, information and communication technologies (ICT), mechatronics, aerospace, energy and environmental technologies, and we will adopt measures to protect intellectual property rights and to ensure better application of norms and standards by the scientific community and industry.

Particular importance will be attached to strengthening the role of the state as a customer for innovations. We will give assistance to high-innovation SMEs planning to expand their business internationally. The work of the Coordinators of German Aerospace Policy and Maritime Policy will be continued. We will continue to provide the appropriate level of support to the aviation industry in Germany in the area of research, development and technology in order to ensure that German companies have a fair chance against international competitors. In view of the importance of the maritime industry, the coalition undertakes to strengthen the industry's competitiveness by supporting innovation in shipbuilding.

Germany's international competitiveness as a location offering cutting-edge technology is enhanced by selected innovative flagship projects including, for example,

• the GALILEO European satellite navigation system with key mission control and technology centres in Germany,
• the development of conventional high-efficiency power stations with the target of zero emissions,
• the introduction of the electronic health card,
• the further development of fuel cell technology,
• the expansion of rapid rail systems, including at least one Transrapid test track in Germany.

In order to secure the future of Germany as a location for industry and research, the coalition parties will create incentives to establish and expand modern and broadband telecommunication networks. For this purpose the new markets resulting from corresponding investments will be exempted from regulatory interventions for a certain period of time in order to establish the necessary planning certainty for investors. The relevant legislation is to be included in the forthcoming law to amend the Telecommunications Act (Telekommunikationsgesetz).

1.8 More favourable conditions for the craft and SME sectors

In order to strengthen the craft and SME sectors and to combat moonlighting, private expenditure on household maintenance and modernisation measures is to be deductible to a limited extent from income tax.

An evaluation of the amended Crafts Code which came into force at the beginning of 2004 will show whether and what corrections are needed. The evaluation is to include the possibility of introducing a minimum qualification for those occupations for which the master craftsman's certificate is no longer required. EU requirements in relation to the directives on services and on the recognition of professional qualifications must not be allowed to undermine the master craftsman's certificate. Increased international cooperation is needed with respect to controls designed to more effectively combat abuses of the legally restricted employment possibilities for craftspeople from Eastern Europe employed in Germany.

The "National Pact for Career Training and Skilled Manpower Development" has proved effective and will therefore be further developed. The range of initial vocational training on offer will be expanded through graded training regulations in order to better reflect the differences in achievement of the young trainees. It has been agreed that each time training regulations for an occupation are updated or new training occupations developed, it will be examined whether introducing a graduated system would be sensible and possible. In the context of the pact, we appeal to the social partners to examine what additional contributions they could make to create more training places.

We will simplify and modernise the complex and unwieldy German public procurement law. In this context we will pay special attention to framing the law to better comply with the needs of SMEs, for example, by dividing orders into lots. The tourism industry, in which SMEs play an important role, must be further strengthened and better positioned internationally. The German National Tourist Board must be made more effective and continue to receive a high level of support.

We want to improve the legal environment for the craft and SME sectors in those areas where they are evidently disadvantaged. In order to preserve the diversity of Germany's newspaper landscape in the face of far-reaching structural changes, we will examine whether a modernisation of press cartel legislation would give publishers possibilities to secure their economic base and hold their own in competition with other media.

1.9 Active foreign trade policy

Open international markets and free trade are central to Germany's economic development. Through an active foreign trade policy German companies are to be assisted in their efforts to access the world market. Companies which operate internationally safeguard and create future-proof jobs in Germany as well. We therefore support open markets and fair competition in Europe and worldwide. A successful conclusion to the Doha world trade round is in Germany's interest.

Together with the EU we will, therefore, advocate the continued development of multilateral world trade rules. Appropriate consideration must be given in this process to international labour and social standards, such as the ILO core labour standards.

Globalisation and increasing international economic interdependency demand, in addition to WTO rules and regulations, a targeted foreign trade policy on the part of the Federal Government. Foreign trade and development cooperation need to be more closely dovetailed. The aim is to further speed up cooperation between the Federal Foreign Office, the Federal Ministry of Economics and Technology and the Federal Ministry for Economic Cooperation and Development.

Small and medium-sized enterprises, in particular, must be more effectively supported in their efforts to access foreign markets. The instruments to promote foreign trade and investment will be geared to a greater extent to the SME sector, for example, through the provision of special assistance to SMEs to enable them to attend trade fairs in other European countries.

For German companies which sell knowledge-based products, breaches of intellectual property rights represent a growing threat. The Federal Government, in close association with industry and partner countries, is formulating a strategy with concrete measures aimed at improving the enforcement of intellectual property rights worldwide. We want to use international agreements to combat the trend to seal off markets by using, among other things, patent law.

Hermes guarantees are a proven instrument of foreign trade policy and must be continued, in order, above all, to help the technology-oriented export industry gain access to difficult markets in developing and newly industrialising countries. Export credit guarantees and investment guarantees will be geared towards securing the future of Germany as a business location and promoting industry and employment at home. The international guidelines form the basis for state funding of foreign trade. In the area of export controls, licensing procedures will be further speeded up and red tape cut, while at the same time observing international obligations already entered into.

1.10 A competitive Europe, fair competition in Europe

We emphatically support the Lisbon Strategy, relaunched in March 2005, to create more growth and employment by making the European economy more competitive. The success of the competition strategy depends first and foremost on the Member States and their readiness to undertake reforms. However, we regard the initiative to deregulate existing Community legislation and to improve assessment of the impact of Community legislation as a central contribution on the part of the EU to making Europe more competitive. We will offer further deregulation proposals of our own and contribute to the impact assessment of EU legislation with a view to improving the drafting of EU laws.

The future EU chemicals policy will be a central test of the competition strategy's credibility. The chemical industry plays an important role in Germany's economic output. Germany's role as an important location for the chemical industry must therefore be preserved and strengthened. The proposed REACH regulation needs radical revision to ensure that the safety of chemicals is improved and public health protected, without in the process adding to the cost of manufacturing chemicals or creating bureaucratic obstacles to their use.

We support the further completion of the internal market as an important contribution to more growth and employment. A functioning EU internal market, including in the service sector, is of enormous economic interest to Germany. This will be the criterion which will guide us in the further deliberations on the EU services directive.

Within the framework of the general principles of the EC treaty, the Member States must retain the possibility of continuing to enforce high standards of safety and quality in relation to services (for example to protect health, the environment and public safety). As it stands at present, the country of origin principle does not help us to reach this goal. The services directive therefore needs to be revised. We will approve it at European level only if it is socially balanced, ensures access to high quality public goods at fair prices for every citizen and prevents abuses of labour market rules.

Tax dumping in the EU, which creates incentives to relocate outside Germany, must not be allowed since it distorts competition. EU regional assistance funds should be cut for those Member States whose tax ratio, measured against their economic potential, fails to reach a certain minimum as regards corporate taxes. In contrast to minimum tax rates, this leaves the new Member States the freedom to frame their tax law according to national requirements if they are prepared to forgo their full entitlement with respect to EU Structural Funds.

In order to limit the bandwagon effect of subsidies on German jobs and public finances, we will continue to strive within the EU for agreement on abolishing subsidies with respect to business relocations (similar to the agreement reached under the Joint Länder / Federal Government Scheme for "Regional Economic Support"). The aim of this is to mitigate the effect of enormous differences in support levels and reduce the outsourcing of jobs without national value added within the EU to areas which receive high levels of support. The differential between Objective 1 areas in EU accession countries to neighbouring non-Objective 1 areas must be limited to a maximum of 20 percentage points.

Transitional periods of up to seven years were agreed with the new Member States which acceded in 2004, as well as with Romania and Bulgaria, to limit the free movement of workers. After the end of the first two-year transitional period in 2006 we will make use of the possibility of extending these transitional periods by a further three years and subsequently, in consultation with the EU Commission, advocate a further two-year extension.

2. Labour market

2.1 Cutting non-wage labour costs

The CDU, CSU and SPD will ensure that non-wage labour costs (social insurance contributions) are reduced on a sustainable basis to below 40%.

The contribution to unemployment insurance will consequently be cut on 1 January 2007 from 6.5% to 4.5%. One percentage point of this will be financed by the Federal Employment Agency (Bundesagentur für Arbeit) through efficiency gains and increased effectiveness; a further percentage point will be financed by a full percentage point of value added tax.

The contribution to statutory pension insurance will rise simultaneously from 19.5% to 19.9%. For statutory health insurance a broad strategy will be developed in 2006 which will also aim to at least keep contributions to statutory health insurance stable and if possible to reduce them.

2.2 Priority for young people

We need - more urgently than ever - well trained, highly motivated and creative young people to make our country successful in the 21st century, too. We will therefore make young people a priority area of concern. We want to substantially improve the training and job opportunities available to young people and reduce youth unemployment on a lasting basis. Our aim is to ensure that in future no young person is unemployed for longer than three months.

Specifically this means that:

• We will continue the "National Pact for Career Training and Skilled Manpower" in which the Federal Government and employers have committed themselves to offering training places or an appropriate programme of qualification to all young people willing and able to train. In concrete terms this means the provision of 30,000 new training places annually, 25,000 places in industry and the crafts and trades sector providing vocational preparation schemes, and tailored measures provided by the Federal Employment Agency to promote training.
• At the same time we invite the trade unions to take an active part in the training pact and to work together with policymakers and industry to improve conditions on the labour market for young people.
• We will continue to pursue an active labour market policy and shape it to ensure optimum effectiveness. Finding employment for young jobseekers and arranging training for those seeking a training place will remain a central task of the Federal Employment Agency. Measures include, in particular, supporting young people as they enter vocational training, providing assistance during their training, funding vocational training for the disadvantaged and offering specific aid to young people with disabilities. In addition we provide a broad spectrum of services to help young unemployed people find work.
• The Länder have a particular responsibility for initial training in school.
• We will strengthen the support provided to young people by the "Arbeitsgemeinschaften" (associations made up of local employment agencies and agencies responsible for delivering the basic income for jobseekers) and "optierende Kommunen" (municipalities opting to be the sole agency administering the basic income for jobseekers). The new system of basic income for jobseekers is a consistent and proactive strategy targeted in particular at young people of working age who are in need of help. Under the system young jobseekers are assigned a personal contact partner and placement officer. In future the placement officers throughout Germany will have a maximum caseload of 75 young people, enabling them to maintain direct contact with them and to integrate them more successfully into the labour market. The personal placement officer can offer a range of assistance, including debt and addiction counselling. International experience shows that such intensive assistance using personal contact partners can substantially reduce joblessness.
• This intensive assistance is based on the principle of "support and challenge", with the young people being expected to fulfil the obligations set out in an individual occupational integration agreement. Sanctions apply to those who do not fulfil these obligations. Both elements belong indivisibly together.
  

2.3 Stimulating more employment for older employees

The CDU, CSU and SPD agree that the employment situation of older employees must be improved. International experience shows that a whole raft of coordinated measures in the area of work, education and health is needed for this purpose. It is also clear that incentives for early retirement need to be abolished, as well as measures put in place to maintain and improve the employability of older unemployed people and to reintegrate them into the workforce. Industry, the social partners, the Länder and the regions must work together to ensure the success of these measures in Germany.

Measures to stimulate employment for and by industry

We will discuss the following topics with business associations and trade unions with a view to reaching binding agreements:

• Qualification and continuing training for older employees.
• Possibilities of working time arrangements tailored to the needs of older employees.
• Creating appropriate working conditions for older employees and maintaining and promoting the employability of older people.
• Examining employment promotion instruments in terms of their effectiveness for older people.

There is agreement that training is essential - where appropriate on the basis of agreements reached by the social partners or at plant level - to upgrade the skills of older employees and hence maintain their employability. The intention is that workplace-related training measures should be financed by the employers, not by those paying contributions to the welfare insurance funds. As a transitional measure, the special regulation with respect to the costs of continuing training for older employees, which is scheduled to end at the end of 2005, will be extended by one year and its effectiveness evaluated.

To encourage older people to stay in work, agreements concluded between the social partners or at plant level must strengthen incentives to this effect including, in particular, age-appropriate working hours' arrangements and gradual transition to retirement ("time sovereignty").

Particular importance is attached to improving the legal framework with respect to the use and protection of long-term working time accounts. Long-term working time accounts are to be legally safeguarded. We will examine the possibility of a regulation on the model of the insolvency insurance used for part-time work for older employees.

The New Quality of Work Initiative (INQA) will be continued. One of the concerns of the initiative is to promote the employability of older workers and to support businesses in the use and expansion of employment opportunities for older people.

In order to be able to reintegrate older workers who have become jobless more successfully into the labour market, the effectiveness of general instruments of labour promotion, in particular as regards the promotion of continuing training, will be examined with industry. The CDU, CSU and SPD are in favour of extending, by an initial two years, the instruments of income guarantees for newly recruited older workers provided for under Section 421j of Book III of the Social Code and responsibility for the contributions to employment promotion applying to older workers under Section 421k of Book III of the Social Code and evaluating their effectiveness. They must be tied to specific quantitative targets.

Joint measures of the Federation and Länder

The CDU, CSU and SPD believe that these proposed measures will already be showing results in the medium term. In many regions in Germany it is therefore essential for measures to be taken jointly with the Länder to promote socially useful community work for long-term unemployed older people who can no longer be integrated into the labour market in the final phase of their working lives. The first priority should be to use the 30,000 employment opportunities made available by the Federation in the form of three-year supplementary jobs for the long-term unemployed aged 58 and above. If not all these opportunities for community work are taken up by the end of the year, the length of the scheme will be extended; regional imbalances in take-up will be compensated for by a redistribution of funds.

In the event that the 30,000 job opportunities are all taken up, we will propose to the Länder that up to a further 20,000 non-profit jobs be financed jointly.

More jobs in the regions

The regions will receive assistance on the basis of particularly innovative projects to improve the employment situation of older workers. Up to 250 million euros will be made available to 62 regions in Germany for this purpose ("Perspective 50 Plus - Employment Pacts in the Region" Initiative). At the same time further regions will be incorporated in a dense and sustainable network to assist older workers, and a crossregionalexchange and learning process ensured. A decision on continuing this initiative will be taken at the end of 2007, based on the results of the scheme.

Regulations on fixed-term contracts to be brought into line with European law

The regulations removing restrictions on the use of fixed-term contracts for workers aged 52 and above which are due to expire at the end of 2006 will be made permanent and the regulations brought into line with European law. The fact that this age limit will remain in force creates more legal and planning certainty for companies.

The new provision will conform to European regulations, thus encouraging businesses to recruit more older people.

2.4 More employment for the low skilled - examining the introduction of a combined-wage model

Nearly two million, or 39% of, unemployed people in our country are low skilled or have no vocational qualifications. Too few job opportunities are open to this group of citizens. They need better access to the labour market which, unless they undergo further training, often means only low-paid jobs. These low-paid jobs are topped up by various forms of earnings supplement, including supplementary unemployment benefit II, the back-to-work benefit and child supplement. In many cases these individual arrangements do not mesh together properly and hence are not fully effective.

The coalition parties agree that the so-called low-wage sector in itself and its relationship to the total level of social transfers to "communities of need" (i.e. households consisting of the benefit claimant and dependants) needs to be overhauled. We want to ensure that wages are not forced down to a morally indefensible level, while at the same time giving people more opportunities to take on low-paid jobs. Despite the very different programmes of the parties, there is agreement that the Grand Coalition must put a stop to this undesirable trend.

We will therefore consider introducing a combined-wage model which will make it worthwhile for the low-skilled to take on simple work through a balanced combination of wages and social benefits, while creating new possibilities for additional simple jobs. It is already clear, however, that the CDU, CSU and SPD do not intend through such a measure to subsidise businesses on a lasting basis or create an additional labour market instrument.

The aim is to merge existing programmes and measures to supplement earnings, ranging from supplementary unemployment benefit II to back-to-work benefit and child supplement, to provide an effective overall approach to delivering assistance. For this purpose we will set up a working group to present a systemic analysis of the existing regulations, establish the necessary transparency and evaluate the effectiveness of the measures. The working group will include in its analysis the impact of these measures on the system of taxes and welfare contributions and also examine the effects of the reduced burden of contributions with respect to mini- and midi-jobs. In this connection, the working group will also need to examine the Posted Workers Act (Entsendegesetz) and the minimum wage, as well as the impact of the EU services directive.

On the basis of the results presented by the working group, the Federal Government will seek solutions in the course of 2006. At the same time it will work with the social partners to seek ways to establish transparent regulations for the low-wage sector which are compatible with the requirements of the market.

2.5 Active labour market policy

The active labour market policy makes an important contribution to integrating and improving the job opportunities of jobseekers. The CDU, CSU and SPD will continue and further develop the active labour market policy in the future.

It is almost impossible for people to gain an overview of the large number of different support measures in place. There is considerable evidence that individual measures and the, in some cases, substantial sums paid out in unemployment insurance could be better targeted and used more economically and efficiently.

The CDU, CSU and SPD will therefore scrutinise all labour market measures. Those measures which prove effective and help to enhance employability or lead to employment will be continued. Those measures which prove ineffective and inefficient will be scrapped. The review is to be completed by the end of the coming year.

On the basis of this analysis, the active labour market policy as a whole will then be radically realigned to ensure that in future contributors' and taxpayers' money is used as effectively and efficiently as possible. In detail this means:

• In order to ensure that the evaluation is accurately targeted and meaningful, we will extend a number of active labour market policy measures due to expire until the end of the coming year. This applies, for example, to commissioning the relevant agencies to take responsibility for employment integration measures.
• In the case of some other measures we will already start to make corrections in the coming year:
• The number of personnel service agencies (PSAs), for example, will be considerably reduced and the obligation for each regional employment office to set up a personnel service agency scrapped. Only where PSAs work successfully will they continue to be funded by the Federal Employment Agency.
• In addition, we will extend the business start-up grant ("Me" plc microenterprises) for a limited period up to 30 June 2006. Afterwards a new business start-up instrument for the unemployed, to include a tideover allowance, will be developed and the business start-up grant discontinued.
  

Consideration will be given to whether the new instrument should be an obligatory or a discretionary measure provided by the Federal Employment Agency. In light of all these measures, the CDU, CSU and SPD emphatically declare their intention to support business start-ups by the unemployed as this offers a way for many people to become independent and secure their own livelihood. The Federal Government is to reach agreement with the Federal Employment Agency to ensure that the Federal Employment Agency fulfils its mandate with respect to employment promotion.

• The CDU, CSU and SPD agree that effective measures must be introduced to combat the recurrent rise in unemployment in the winter months. The collective bargaining partners in the construction industry have established an important basis in this respect. Through the cost-neutral introduction of a seasonal shortterm allowance financed from contributions to unemployment insurance, it is hoped, with effect from this winter already, to avoid lay-offs due to weather conditions or lack of orders and corresponding outlay on unemployment benefit during the months of December to March.
• At the same time, we must comply with our international obligations with regard to recording unemployment figures and compile reliable data enabling comparison between countries. We will therefore continue in future to comply with these obligations and maintain the ongoing surveys in accordance with ILO standards. We will evaluate and examine the findings of these new statistics.

2.6 Basic income for jobseekers (Hartz IV)

The CDU, CSU and SPD remain committed to the merging of unemployment assistance and social assistance in the basic income for jobseekers (Hartz IV). Bringing together help for the former recipients of social assistance and unemployment assistance in one system was and remains the right thing to do.

However, such a complex and extensive reform project requires a flexible approach to necessary adjustments and improvements. We will therefore respond to the experiences gained this year with detailed and specifically tailored changes and optimise the entire Hartz IV process.

• We have agreed to follow the recommendations of the Ombudsrat (appeal council) and bring into line standard subsistence benefits in Eastern and Western Germany. Benefits in the new Länder will rise by 14 euros per month.
• The CDU, CSU and SPD agree that immediate changes to the legal and administrative provisions are needed to optimise the practical implementation of the Hartz IV reforms. Through organisational changes in the Federal Employment Agency it will be ensured that the Federation's interests in implementing the basic income for jobseekers will be safeguarded. In addition to technical changes there will also be changes to benefit law.
• Confidence clause for municipalities opting to be the sole agency administering the basic income for jobseekers: if, at the end of the evaluation in 2008, there is no consensus between the coalition partners on the results and consequences, the legal provision currently in force for municipalities to exercise their option will be extended, on the existing scale, for a further three years after 31 December 2010.
• We will make the definition of "community of need" more precise. In future the "communities of need" formed by parents will in principle include unmarried children who have attained their majority and are under the age of 25.
• In relation to assets which are exempt for the purposes of calculating benefit entitlement, we will alter the emphasis of the regulations in favour of old-age provision. The exempt amounts with respect to old-age provision could in future be raised and the current tax allowances reduced correspondingly.
• Under-25-year-olds who want to move into their own dwelling for the first time will in future only be entitled to benefits if they have the prior consent of the funding agency. By this means we want to prevent "communities of need" being set up solely for the purpose of claiming higher unemployment benefit II.
• We will examine the definition of cohabiting partnerships and the reversal in the burden of proof.
• We will additionally examine whether and, if appropriate, to what extent financial incentives for the funding agencies could be improved if they are successful in helping benefit claimants to find employment.
• Persons whose ability to work is restricted and who cannot find work on the regular labour market must be given prospects. We will examine whether and how conditions can be created to give such people access to jobs which provide them with meaningful opportunities for personal development appropriate to their individual circumstances.
• Nationals of other EU Member States who are in Germany solely for the purposes of seeking work and have not previously worked in Germany will not in future be eligible for unemployment benefit II.
• In future, young people who are in receipt of a grant under the Federal Training Assistance Act (BAföG) or a training allowance are to receive benefits from these systems which cover their needs so that the amounts in question will no longer have to be topped up with unemployment benefit II.
• The responsibilities of the "Arbeitsgemeinschaften" (associations made up of local employment agencies and agencies responsible for delivering the basic income for jobseekers) and licensed local authority agencies with respect to careers counselling, training and job placement and those who receive benefits in accordance with the provisions of both Book II and Book III of the Social Code will be legally clarified.
• With respect to the child supplement, we will clarify whether the claimant has a right to choose between a tideover supplement to bridge the transition from unemployment assistance to unemployment benefit II and the child supplement.
• We will take energetic and consistent steps to clamp down on benefit fraud, in order to ensure that the readiness to help the really needy in our society in a spirit of solidarity is safeguarded on a long-term basis. In particular:
• The CDU, CSU and SPD have agreed to create the legal conditions to oblige benefit recipients to take part in a telephone investigation into their current circumstances.
• The existing possibilities of data comparison are to be used more consistently. We will therefore create the legal basis for making wider use of data comparison in order to identify accounts and deposits held by benefit recipients abroad as well.
• We will examine, in collaboration with the Länder, the possibility of establishing an external service attached to the "Arbeitsgemeinschaften" and licensed local authority agencies.
• It is to be made clear to every applicant that the principle of "support and challenge" will be enforced systematically from the beginning of the application process for those claiming the basic income for jobseekers. Those applying for benefits for the first time, therefore, are to receive offers of employment or training immediately after their individual circumstances have been assessed. These measures may also serve to test an individual's willingness to work.
• Practice has shown that the existing rules on sanctions are too rigid and are difficult to apply appropriately in individual cases. We have therefore agreed to introduce a change to the law in this respect.
• Large numbers of people currently claim unemployment benefit II although they are incapable of gainful employment. The result is added expenditure for the Federation and health insurance funds. We will therefore give the health insurance funds the right to demand that a claimant's ability to be engaged in gainful employment be assessed.
• Finally, it is our duty to anchor in our population an awareness of the need for personal responsibility, participation in gainful employment and solidarity with those in need of assistance. Since the introduction of the basic income for jobseekers, an important role in this respect has been assumed by the Ombudsrat (appeal council). We have therefore decided to extend the work of the Council by six months. The Ombudsrat (appeal council) will present its recommendations in a final report on 30 June 2006.
• The CDU, CSU and SPD agree that the review instituted on 1 October 2005 to determine the level of the Federation's contribution to accommodation costs must be continued without delay. The target of cutting the amount paid nationwide by the municipalities under the Fourth Law for Modern Services in the Labour Market (Hartz IV) by 2.5 billion euros is to be retained. Immediately after the new Federal Government has been formed, the necessary consultation with the Länder and the local government associations will be set in train. On this basis - in the wake of the legislative process which has already been initiated - the level of the Federation's share in accommodation and heating costs will be fixed both for 2006 and for 2007. A further - final - review will be completed by 1 October 2007.

In total, the proposed measures and improvements to Hartz IV will bring savings of 3.8 billion euros. We will achieve these savings by making the following changes:

• Introducing a basic right for the state to make parents provide for those aged up to 25 years (0.5 billion euros).
• Limiting funding for young people moving into their own dwelling for the first time (0.1 billion euros).
• Improving administrative processes and organisational structures with respect to Hartz IV (1.2 billion euros).
• Reducing the payment for statutory pension insurance from 78 euros to 40 euros per month (2 billion euros).

2.7 Reforming labour law

2.7.1 Further developing protection against dismissal

The CDU, CSU and SPD will develop the law on protection against dismissal with the aim, firstly, of encouraging more employment and, secondly, of maintaining on a long-term basis the protective function of the regulations for existing employment relationships. At the same time we want to create more transparency and more legal certainty for employees and employers.

We will therefore, on the one hand, abolish the possibility of terminating employment contracts without substantive reason in the first 24 months. We will also give employers the option, with respect to new appointments, of agreeing a waiting period of up to 24 months with a newly recruited employee before making the employment permanent, instead of the statutory standard waiting period of six months. This option will also apply in the case of a re-appointment with the same employer if at least six months have elapsed since the end of the previous employment contract. The founders of new businesses will continue to have the possibility of terminating employment contracts without substantive grounds for up to 48 months in the first four years after starting business. The CDU, CSU and SPD agree, however, that an addition to the special rule applying to founders of new businesses giving them the possibility of extending the period of exemption from dismissal protection will not be allowed.

By these measures we are simplifying the rules on dismissal protection and helping to reduce the number of cases brought before the employment tribunal, while at the same time creating a reliable contractual basis for employees. Above all, however, these changes to dismissal protection are designed to boost the recruitment of new employees on contracts with no fixed term over fixed-term employment relationships.

2.7.2 Widening the scope of the Posted Workers Act

The CDU, CSU and SPD will extend the Posted Workers Act on the basis of the EU posting of workers directive to the collective bargaining agreements which have been declared generally binding in the building cleaning trade. For the construction industry the existing Posted Workers Act will remain unchanged. The coalition will examine further extensions of the law to other branches of industry if corresponding unwanted social distortions are identified with respect to posted workers and if collective bargaining agreements apply in these branches which previously were declared generally binding under the Collective Bargaining Agreement Act (Tarifvertragsgesetz). Since a corresponding collective bargaining agreement that has been declared generally binding already applies to the building cleaning trade, the coalition will immediately undertake to extend the Posted Workers Act to cover this trade.

2.7.3 Implementation of the EU working time directive

The transitional regulation for the Working Time Act (Arbeitszeitgesetz), which gives the social partners time to adapt their agreements to the rulings of the European Court of Justice on on-call time and which expires on 1 January 2006, will be extended by one year. Statutory provisions will limit the number of Sundays on which retail shops may open to a maximum of four Sundays in the year.

2.7.4 Guaranteeing and shaping co-determination in enterprises

Cross-border economic activities and structural changes in business enterprises are features of a converging Europe. Securing and shaping the rights of participation of employees at European level has therefore been and remains an important task. We will strive to ensure that European company law is further developed through the speedy adoption of the directive on the cross-border transfer of the registered office of limited companies. In this process we want to ensure that the participation rights of employees are safeguarded on the basis of the solutions already arrived at with respect to the European Company and the mergers directive.

The successful German model of co-determination must keep pace with global and European challenges. It is the task of the Government Commission on Codetermination under the chairmanship of Professor Biedenkopf to formulate proposals by the end of 2006 for modernising German co-determination in enterprises to bring it into line with Europe on the basis of existing legislation. We will take up the - consensual - findings of the Commission and, where necessary and appropriate, make changes to our national system of co-determination in enterprises.

2.8 Measures to combat illegal employment, moonlighting and the black economy

Moonlighting, illegal employment and the black economy are not trifling offences; they damage our country. The CDU, CSU and SPD agree that these offences must be prosecuted resolutely and energetically. It is wrong for those who are honest in our society to feel they are being made to look foolish.

We therefore intend to clamp down on the whole area of the black economy. There is considerable potential here to consolidate public finances and also to help reduce non-wage labour costs. We intend to make use of this potential.

• We will continue the work of the Task Force on Illegal Employment and Benefit Fraud under the joint direction of the Federal Ministry of Finance and the Federal Ministry of Labour and Social Affairs. The customs service (illicit employment financial control department) will step up its checks.
• We will pursue a partnership-based dialogue with all new Member States to clear up problems and differences of opinion. Our aim, in particular, is to conclude administrative agreements with the Member States affected in order to improve cross-border controls and cooperation with the authorities.
• The CDU, CSU and SPD agree that cooperation between the Federation and Länder on combating abuse of the freedom of services and establishment must be stepped up.
• Since it is believed that the black economy manifests itself particularly frequently on building sites, in the taxi trade and in the catering trade, the Federal Government will examine the findings of a planned pilot project being conducted in the Berlin-Brandenburg region which obliges employees in these branches of the economy to carry chip cards visibly displayed which identify them as being regularly employed and, if appropriate, introduce the chip cards nationwide.

2.9 Seasonal work

With respect to the licensing of foreign seasonal workers, the Federal Government will extend in modified form the regulation governing the employment of seasonal workers which expires at the end of the year. It is important to continue to ensure in this respect that the farming industry is able to adequately cover its demand for seasonal labour. In view of the persisting high level of unemployment, however, it is our aim to find more employment first and foremost for jobless benefit claimants, including short-term seasonal employment. For this purpose it is necessary, firstly, to step up the efforts of the job centres and the agencies administering the basic income for jobseekers to place workers in the sectors relying on seasonal work.

Secondly, it is necessary to modify the regulation by imposing limits on the number of work permits to be issued for business enterprises to ensure that the inflow of foreign labour is kept within manageable proportions. The volume of seasonal labour from Central and Eastern Europe attained in recent years must be significantly cut and replaced as far as possible by domestic labour.

Under European law seasonal workers from the new EU Member States have become subject, since the accession of these countries, to the social insurance law of their home countries. The registration of seasonal workers and the transfer of contributions by German employers to the social insurance agencies in these countries is still a very complicated process. The Federal Government will push for the development of procedures which reduce red tape to a minimum.

2.10 European social policy

The European social model as part of the Lisbon Strategy must be further developed. For the general public the key factor will be whether it is possible to combine the necessary flexibility with social protection and social security ("flexicurity").

At the present time, in the context of labour market and economic developments in Germany, it appears necessary to retain the transitional periods with respect to restricting the freedom of movement for workers from the ten new accession countries. The transitional periods have protected the German labour market from increased migration.

With respect to a possible directive on the access of nationals of third countries to self-employment and dependent employment, it must be ensured that the regulations are flexible and national employment policy is not restricted.With respect to the forthcoming draft directives in relation to labour law (codetermination in relation to change of registered office, working time, temporary work, equal status, optical radiation), the regulations should have the necessary flexibility and, at the same time, keep in focus the justified interests of the employees. With respect to the negotiations at European level, the Federal Government will strive for fair and viable compromises between all the Member States.

3. Education and training

3.1 Education is the key to the future

Education is the key to individual opportunities in life and to cultural participation, to development and innovation. Universal participation in education and training is the essential precondition for ensuring that no talents remain unused. To achieve this goal, our education system as a whole must become more transparent with more transfer opportunities between different educational and training pathways and must ensure better individual support.

The cohesion and social development of our society, our prosperity and the competitiveness of our industry depend more and more on the importance which is attached to education. Education is the decisive factor, not only for the future of our country, but also for the opportunities of each and every person.

We want Germany to once again generate more prosperity through growth and innovation. We can only achieve this objective if everyone is able to fully develop his or her abilities and talents. Germany needs the formation of responsible elites, drawn from different social backgrounds. A successful education system must promote talents, support people with learning difficulties and eliminate the close linkage between social background and educational success.

3.2 Equal opportunities in education: improved childcare, early and individual support

Education and care for all children from the very start: The decisive factors which influence a child's development are determined at the beginning of his or her life. We are therefore backing improved and individual support for all young children. We consider it essential that children should learn to speak German before they start primary school.

Full-day education and schooling widen the opportunities for fostering all talents and compensate for weaknesses. Furthermore, full-day schemes make it easier for parents to balance a family and a career.

This is why we are supporting the expansion of full-day schooling. Federal budget funds of approximately 4 billion euros for building all-day schools will be callable until the end of the current electoral term under the "Future, Education and Care" funding programme.

We will also continue to play our part in future to ensure that Germany can take part in international comparative studies such as PISA. Anyone who wants to improve his or her performance must know where he or she stands.

We aim to expand educational reporting and to establish it as a constant factor in education policy in cooperation between the Federal Government and the Länder. In addition, we will strengthen empirical educational research within the framework of general research funding in order to gain information which can help the Federal Government and the Länder to expand their respective tasks in the field of education.

3.3 Strengthening training under the dual system - training opportunities for every young person

The dual system of vocational education gives Germany an international competitive advantage. It is a success story that we wish to continue. For the individual, it means a good start to his or her successful vocational and personal development and continues to offer the best protection against unemployment. Vocational training is becoming increasingly important for the competitiveness of German industry. Our objective is that every young person who is willing and capable should be offered training.

155,000, or 17.1%, of all 25-year-olds do not hold upper secondary level qualifications; in other words, they have neither completed vocational training nor have they gained higher education entrance qualifications (Abitur). Youth unemployment remains an urgent problem, not only for labour market policy but also for education policy in Germany, and demands a solution.

The Federal Government will do everything in its power to achieve its goal of ensuring that no young person under 25 years of age is unemployed for more than three months. It is also banking on the social responsibility of industry and the latter's interest in the availability of skilled young staff.

We therefore welcome the commitment of companies to establishing additional traineeships. We will expand the National Pact for Career Training and Skilled Manpower Development, and will involve industry and trade unions in this effort. We will also take into account questions of trainability and possibilities of collective bargaining agreements (such as sectoral contributory funding, increase in the number of traineeships).

The Bundestag and the Bundesrat both adopted the reform of the Vocational Training Act (Berufsbildungsgesetz), which came into force in April 2005. We intend to study the effect of this reform with our partners in the course of the electoral term. The range of vocational training will be extended by means of graded training regulations in order to better meet young people's different levels of ability. It has been agreed that the wisdom and feasibility of graded training will be considered whenever training occupations are updated or new occupations introduced.

We will continue to modernise training occupations to meet practical requirements and will improve training structures in the regions, as agreed in the training pact. Furthermore, we will make girls and young women more aware of the wide range of occupations available, particularly in technical occupations.

Targeted measures will be adopted to encourage young people and entrepreneurs with migrant backgrounds to take an active interest in vocational education and training. Youths and adults without qualifications should be given a "second chance" to either return to education to acquire school-leaving qualifications or to complete vocational training.

We will continue to implement tried and tested measures in the field of introductory training and to improve trainability and training maturity. Furthermore, we will continue measures to prepare young people with poor starting chances for vocational training and to improve their trainability and training maturity and we will provide assistance to support training. The individual needs of young people will be the decisive criterion for the structural reorganisation of training preparation schemes.

In order to ensure that adequate account is taken of the German dual system of vocational training within the European Union and that the system remains competitive, we intend to play an active role in shaping European cooperation in vocational training and to encourage developments in Europe with a view to greater transparency and comparability in vocational education and training. We thereby support the development of a European Qualifications Framework (EQF) as agreed under the Copenhagen Process, a European Credit Transfer System in Vocational Training (ECVET) and the introduction of the Europass.

3.4 Improving opportunities for transfer between educational pathways

We want to improve opportunities for transfer between education sectors. Higher education legislation should, as a general principle, allow people who have successfully completed vocational training admission to universities and universities of applied sciences.

Initial and continuing vocational training will be comprehensively and systematically interlinked.

3.5 Lifelong learning: increasing participation in continuing education - using the growth potential of continuing education

Rapid technological progress in the knowledge economy demands that the vocational skills and know-how gained during initial training are maintained, adapted and extended. Continuing education is more than an educational principle. Lifelong learning ensures qualifications and protects people from losing their jobs. Moreover, demographic change demands that older employees remain in active employment and keep up to date with the state of the art in their field of employment. The percentage of people involved in continuing education must be increased considerably if receptiveness, willingness to learn and ability to learn are to be improved across the generations.

In the medium term, we intend to make continuing education the fourth pillar of the education system and to establish a continuing education system with standard national framework conditions. Financial assistance for trainee master craftsmen (Meister-BAföG) has proved successful and will be continued.

We will make the wide range of continuing training programmes more transparent by optimising educational and vocational counselling. We will extend quality assurance in the field of continuing education programmes.

The general public, industry and the individual must be involved in the funding of continuing education in an appropriate manner. We intend to develop a new funding instrument in the form of educational savings plans and to amend the Capital Formation Act (Vermögensbildungsgesetz). This will have a neutral effect on the budget.

In particular, we want to assist the socially disadvantaged in order to increase their participation in continuing education.

We are encouraging both sides of industry to set up training-time accounts where employees can collect overtime and days off over extended periods of time. It is the task of the state to ensure appropriate framework conditions. These include, for example, protection for working-time and learning-time accounts in cases of company insolvency.

3.6 Enabling universities to compete internationally

Universities are the foundation of our academic system. They are providing an ever greater proportion of the rising generation in the knowledge-based society with qualifications. Their research results create the basis for innovations. At the interface between education, research and innovation, they play a crucial role in deciding on the jobs of tomorrow, on societal progress and on social security.

Autonomy, excellence, responsibility, freedom and competition are to be the guiding principles for the higher education system of the future.

We want to strengthen competition between institutions of higher education.

Together with the Länder, it is our task to bring not only the top ranks of the German higher education system up to world-class level. We also want to ensure quality on a broader level that will guarantee excellent and demand-based training with regard to the significant increase in the number of students which we are expecting.

We want to establish a European Higher Education Area by the year 2010. The Bologna Process is a step in the right direction to help Europe come together in the field of higher education. We want to promote mobility in the European Higher Education Area and facilitate the compatibility of study courses.

Together with the Länder, the institutions of higher education and the science organisations, we want to ensure the success of the Initiative for Excellence to Promote Institutions of Higher Education and the Pact for Research and Innovation. Our aim continues to be that at least 40% of a year group should study at an institution of higher education. Germany needs more highly qualified people if it is to meet the economic and industrial demands of the future.

The coalition partners take different views on the question of tuition fees.

The structure of Federal Training Assistance (BAföG) as a social benefit to finance a student's livelihood will remain unaltered (no reduction in the grant).

We will expand support for the highly talented. We want to promote young talent and up-and-coming researchers and to open up career prospects for them. Germany must be able to offer attractive study and working conditions for the best scholar from around the world. We will enhance the opportunities for independent research and early academic independence and, together with the Länder, we will search for ways to open up reliable career paths for young researchers. By doing so, we want to encourage young German researchers to return to Germany and to persuade foreign scientists to settle here. Furthermore, we will strengthen the funding programmes aimed at excellence for young scientists in all disciplines.

Measures must be taken to improve the balance between a family and a career in research and teaching. Opening career opportunities for women in teaching and research remains a central concern of this Federal Government.

3.7 Other framework conditions which are relevant to research and education

Within the framework of the GATS negotiations and in the further negotiations on the EU services directive, we will continue to endeavour to ensure that there remains a clear distinction between the public and private sectors in education, that foreign education providers may not legally claim the financial support available to German providers, that consumer protection regulations and quality assurance are guaranteed and national priorities in education policy upheld.

We want copyright legislation which is favourable to education and science.

4. Research and higher education institutions

We must find answers to the key challenges of the future. Apart from the questions of an ageing population and globalisation, we must also consider the preservation of our natural basis for life. As a highly industrialised country with few natural resources, Germany must concentrate its strength on those areas where it is able to compete.

We are thus developing new products, ideas for resource-efficient processes, and future-oriented services in innovative areas with a high value-added element. Research which benefits human beings and the environment produces innovations which secure jobs and improve the quality of life. The preconditions for these developments are high standards in research and development as well as in the use and advance of modern technologies.

The preconditions in Germany are favourable for achieving top results in science and research. We have a good, sometimes even excellent, broad-based higher education and research landscape and innovative companies.

Research needs freedom. This is a great good. Basic research is the basis for innovation. We want to provide scope for young talents, new ideas and experiments.

Germany stands for competition for the best brains. We want an innovations policy which covers the whole value-added chain from basic research to applications. We support the internationalisation of science as a contribution to shaping globalisation processes.

4.1 R&D expenditure: investing in the future

The members of the European Union have set themselves the goal of becoming the most competitive and dynamic knowledge-based economy in the world by 2010. In order to achieve this aim, the share of expenditure on research and development is to rise to at least 3% of GDP. Germany has already reached a share of 2.5%.

Investments in education and research are of key importance for Germany's future viability. We are therefore sticking to the 3% objective and intend to reach it in gradual steps. This requires considerable efforts on the part of the state and business.

4.2 A seamless innovation policy - ensuring innovation-friendly framework conditions

We are committing ourselves to a policy which encourages innovations. All the federal ministries will contribute towards this course of action. We intend to make the stimulation of innovations a decisive criterion for state action in the same way that environmental protection and sustainability are already important factors when making decisions today. Apart from promoting research and technology, the Federal Government will also make framework conditions more innovation-friendly, particularly in the fields of bio- and genetic engineering, information and communication technology, chemistry, medicine/pharmacy, energy and transport.

We will continue to seek a balance between ethical principles and scientific progress.

4.3 Key areas in cutting-edge technologies and project funding

We will work together with science and business to develop innovation strategies for cutting-edge technologies in order to expand Germany's lead in markets and technology or to gain such a lead. Important areas include bio- and genetic engineering, information and communication technology, nanotechnology and microsystems engineering, optical technologies, energy technology, environmental technology and aerospace technology.

Project funding knits together science and business and has proved to be an effective transmission belt between research and practical applications. It encourages the establishment of networks and clusters which provide a mutual stimulus for first-rate scientists and innovative companies.

The Federal Government's project funding is an important instrument for achieving the 3% target. Every euro spent by the state on research and development is matched by more than one euro from industry. We therefore want to ensure an overproportionate increase in the funds available for project funding within the 3% target.

We will consider whether it is useful to introduce a separate research funding law as a legal basis for federal project funding.

We want to ensure that we in Germany also make use of the opportunities offered by new scientific breakthroughs, for example findings in the life sciences on the causes of the most common diseases or of new infectious diseases, and on ways to combat them. We will therefore strengthen clinical research in Germany. Health research provides innovations which enhance the quality of life for both young and old and, at the same time, secure the fundability of the health system. We will continue to attach special importance to funding research on adult stem cells in order to develop the potential of regenerative medicine, whilst at the same time observing ethical borders.

We will strengthen funding for research in the field of sustainability. Germany is making a decisive contribution to preserving our natural basis for life, to securing and exploiting energy resources, to preventing disasters, to protecting the climate, to solving conflicts and to securing peace.

One example of a successful German development is the tsunami early warning system now being used off the coast of Indonesia. The Federal Government is therefore supporting environmental technology, earth observation and regenerative energy technologies as well as security and fusion research.

The humanities and the social and cultural sciences are of great importance in a world of rapid societal and technical change. Their task is to contemplate changes and to affirm tradition and cultural memory. At this level, they make a decisive contribution towards a critical perception of the present and our future opportunities for action. We will therefore strengthen these areas.

4.4 Strengthening Germany as a location for research

We want an efficient scientific and research system that is internationally competitive.

To ensure this, university and non-university research will be better networked and the transfer of technology managed through a modern policy of cluster development.

We will implement the Initiative for Excellence agreed between the Federal Government and the Länder as well as the Pact for Research and Innovation, and we will take initial steps towards full economic costing.

We will provide a secure financial basis for the construction of large-scale research facilities which have already been agreed.

4.5 Strengthening technological efficiency, improving the transfer of technology and stimulating research in industry

Germany's technological efficiency is largely due to its small and medium-sized companies. The latter's powers of innovation must be further strengthened if they are to survive in the global competition. We will therefore introduce specific measures to gradually introduce those small and medium-sized companies to research and development which have not worked in the field of innovations in the past. We will further simplify access for small and medium-sized companies to existing support programmes and makes these more transparent.

We will further improve the conditions for growth-oriented business start-ups through an Entrepreneurship Initiative, particularly for spin-off companies in the field of science.

We will create new instruments for improving the transfer of scientific results to products and services.

We will make the conditions for obtaining venture capital competitive by international standards.

We will further develop the "Partners for Innovation" initiative, taking particular account of innovative small and medium-sized companies.

4.6 Strengthening competitiveness in the new Länder

We will aim funding policy for the new Länder consistently towards clusters which can make use of their strengths to generate sustainable economic growth in their respective regions. Such growth centres have an effect outside their own regions and contribute to a positive development in the new Länder. The effectiveness of existing programmes will be checked and developed further. The new Länder, in particular, need effective funding strategies which boost innovative potential in the regions, such as, for example, the internationally recognised programme "Entrepreneurial Regions".

4.7 Evaluating the Federal Government's departmental research

Following the successful evaluation of institutional research funding in the nineties, the Science Council is currently studying the Federal Government's research institutions - its so-called departmental research. The Science Council will present its recommendations on the Federal Government's departmental research in 2006. This will be the basis for improving and developing the system further.

4.8 German science with worldwide appeal

We want to continue to contribute towards building and elaborating the European Knowledge Area. We are seeking to assume a central role in shaping European research policy, particularly through efficient participation in the EU Seventh Research Framework Programme 2007-2013 (FP 7). It is our aim to incorporate priorities at European level which we consider important from a national perspective.

We intend to use the German presidency in 2007 to emphasise the importance of education, research and innovation as keys to growth and prosperity in Germany and Europe.

4.9 Encouraging people to enjoy their own abilities - developing a new culture of innovation

We intend to fill more young people in Germany with enthusiasm for science and technology. As an industrial nation, we must encourage an interest in scientific and technical training and study courses as well as an awareness of the elementary significance of research and innovation for society and business. We want to further expand the dialogue between the scientific community and society which began with the Science Years.

5. Energy

5.1 Halting the rise in energy prices, stimulating competition

Energy policy is basic economic, structural and climate protection policy. A secure, cost-effective and environmentally friendly supply of energy is a fundamental condition for a modern and productive national economy. It is closely linked to policies regarding industry, technology, small and medium-sized enterprises and foreign trade. This is why Germany needs an integrated energy policy concept that includes a precautionary strategy with regard to globally dwindling fossil resources.

A sound integrated energy policy concept must be based on a balanced energy mix. The CDU, CSU and SPD do not share the same opinion on the use of nuclear energy for power generation. For that reason, we cannot change the agreement between the Federal Government and power supply companies of 14 June 2000 or the procedures contained therein or the corresponding regulations of the amended Atomic Energy Act (Atomgesetz). The safe operation of nuclear plants is of the highest priority for the CDU, CSU and SPD. In this context, we will continue and expand research on the safe operation of nuclear plants.

The CDU, CSU and SPD acknowledge Germany's responsibility to ensure the safe final disposal of radioactive waste and will tackle this issue in a speedy and resultoriented manner. We intend to solve this question by the end of the current electoral term.

The Federal Government and the Länder cooperate closely in the supervision of the nuclear industry.

An important element of a coherent energy policy is to intensify and expand energy research and to increase its funding. We want to promote innovation and technological development in the energy sector in order to strengthen the competitiveness of our industry, to accelerate the market introduction of modern energy technologies and to contribute to climate protection.

Together with the German hard-coal mining industry, the Länder of North-Rhine Westphalia and the Saarland, we will determine the future of mining subsidies. The subsidies the RAG group (Ruhrkohle AG) has been granted until the year 2008 are legally binding. There is no legal entitlement for the time after 2008. We have to consider further cuts to promised subsidies without departing from the path of socially acceptable adjustment. Dismissal into unemployment should be avoided. The potential savings should be used to promote structural change in the mining regions.

The RAG group's initial public offering holds new development opportunities. In order to achieve a calculable and fair division of opportunities and risks, the first step must be a scientifically sound inventory of contaminated sites as these must not remain an incalculable risk for public budgets. We will start negotiations with all stakeholders at the beginning of 2006.

5.2 Renewable energies

An important element of our climate protection and energy policies is the ecologically and economically sound expansion of renewable energies. We will therefore:

• pursue ambitious goals for further expansion in Germany, namely
• increase the share of renewable energies in electricity production to at least 12.5% by 2010 and to at least 20% by 2020,
• increase the share of renewable energies in total energy consumption to at least 4.2% by 2010 and to at least 10% by 2020 and continue to increase it in line with the National Sustainability Strategy (Nationale Nachhaltigkeitsstrategie) after 2020,
• significantly increase the share of biomass in primary energy consumption inthe medium term;
• maintain the basic structure of the Renewable Energy Sources Act (Eneuerbare-Energien-Gesetz - EEG) but at the same time review the economic efficiency of individual fees by 2007. In this context we will adjust fees, degression steps and funding periods to the development stages of individual renewable energies and, if necessary, define new priorities;
• concentrate on the repowering of existing wind power installations and on offshore wind energy generation and improve the framework conditions for these activities (e.g. expansion of the power grids);
• make greater use of the market potential of renewable energies in the heat sector through continuing the market incentive programme in its current scope and through further instruments such as a renewable heat use act;
• restructure without delay the hardship clause in the Renewable Energy Sources Act so that power-intensive industries have a reliable and calculable basis (abolition of the 10% capping) and their economic burden is limited to 0.05 cent per kWh;
• create a transparent and reliable calculation method for the apportionment pursuant to the Renewable Energy Sources Act so that energy users are only charged with the effective cost of the electricity fed into the grid;
• pursue existing international activities for the expansion of renewable energies and initiate the creation of an international agency for renewable energies (IRENA);
• intensify the export initiative for renewable energies.

5.3 Biofuels and renewable resources

Fuels and raw materials derived from biomass can contribute significantly to the energy and resource supply and to climate protection. We will therefore:

• further develop the fuel strategy with the objective of increasing the share of biofuels in the total fuel consumption to 5.75% by the year 2010,
• replace the exemption of biofuels from the mineral oil tax by the compulsory addition of biofuels to mineral oil;
• promote the market introduction of synthetic biofuels (BTL) in cooperation with industry by building and operating installations on an industrial scale;
• promote research, development and marketing of renewable raw materials in cooperation with industry.

5.4 Energy efficiency

Increasing the energy efficiency of buildings, equipment, vehicles, power plants and industrial installations bears an enormous potential for economically sound energy conservation. We will therefore:

• steadily increase the energy efficiency of the national economy with the objective of doubling energy productivity by the year 2020 compared with 1990;
• increase funding of the CO2 Building Modernisation Programme to at least 1.5 billion euros per year, significantly improve its efficiency and attractiveness (for example by switching to investment grants and tax relief measures and by including rental accommodation) and also introduce an energy passport for buildings. Our goal is to increase the energy efficiency of 5% of existing buildings built before 1978 every year;
• promote the modernisation of existing power plants and the expansion of decentralised power plants and highly efficient combined heat and power plants;
• review the funding criteria of the Heat-Power Cogeneration Act (KWK-Gesetz) on the basis of the monitoring report to be submitted in a timely manner.
• support the European initiatives to improve energy efficiency and work towards a European top runner programme;
• continue and intensify the dena (German Energy Agency) initiatives for energy conservation in the areas of buildings, electricity use (for example stand-by) and traffic.

5.5 Innovation offensive "Energy for Germany"

We will launch an innovation offensive called "Energy for Germany" to remain a world leader in modern energy technologies. For that purpose, we need adequate energy research. We will therefore:

• gradually increase funding for energy research. This will cover renewable energies and biomass, the use of efficiency technologies on the demand side (industry, products, transport, buildings), centralised and decentralised efficiency technologies for energy production (including storage technologies) and a national innovation programme for hydrogen technologies (including fuel cells);
• arrange with the private sector that it too increases funding for research and the marketing of energy technologies.

Our objective is greater competition among suppliers of electricity and gas. To achieve it, we will attentively follow the effects of the incentives and support the competent authorities in fully using their powers according to cartel law. The instruments of the new energy industry law (with respect to control, laying down fees for grid use and demonopolisation by the regulation authorities) will be consistently applied to determine transmission fees for the use of electricity grids and gas pipelines. We want to counter oligopolies in the German electricity and gas markets by, among other measures, intensifying cross-border competition. For this purpose, it  is necessary to create the required transit capacities and, for the German gas market, infrastructures for liquefied natural gas.

In the interests of a cost-effective energy supply we will not raise the eco-tax further. The current eco-tax relief regulations for the industry will be retained. We want to improve the international competitiveness of our manufacturing industry, especially of the energy-intensive sector. For this reason we will make use of all available relief measures and consider ways of improving our competitiveness when transposing the EU Energy Tax Directive.

Important political and economic decisions on energy are increasingly taken at an international level. We will therefore take an active part in the definition of framework conditions in energy policy in the EU and in international organisations, focussing on the innovative ability and the competitiveness of our national economy. We support European strategies for sustainable and affordable energy and resource supply.

6. Infrastructure - transport, building and housing

Our transport policymakers are aware of the responsibility they carry for the economy, employment and the environment in Germany. We intend to implement an integrated and sustainable transport policy in order to lay the foundations for the necessary mobility of people and goods, for economic growth and for the creation of jobs. This will involve primarily the maintenance, modernisation, upgrading, better use, adaptation and linking-up of transport infrastructure.

The capacity of the transport system as a whole has to be increased. Solutions from the field of information and communication technology, the development of which we are promoting, will help us achieve this objective. We will use fiscal instruments to enhance the innovative capacity, competitiveness and sustainability of the transport sector. As European integration progresses, the improvement of cross-border transport infrastructure will become especially important.

Germany as a logistics hub

We will continue to consolidate Germany's leading position as a logistics hub, which is illustrated by the fact that, to date, around 2.7 million jobs have been created as a result of new logistics chains within the context of growing globalisation. We will promote the creation of an internationally competitive framework to make Germany an even more attractive location for logistics companies and will actively market our logistics assets both at home and abroad.

We will cooperate with the transport industry and shippers to develop, with support from the scientific community, a Freight Transport and Logistics Master Plan, the principal goals of which will be to make the transport system as whole more efficient for freight transport and to optimise utilisation of transport infrastructure.

We will create an appropriate framework to assist German businesses in developing user-focused services for GALILEO. We will also champion a non-discriminatory European market for transport vehicles and their components.

Optimising our transport system will not be possible unless we make further efforts in transport-specific research and development.

6.1 Upgrading and enhancing the capacity of transport infrastructure; sustaining levels of investment

The traffic forecasts in the Federal Transport Infrastructure Plan (Bundesverkehrswegeplan) predict a huge increase in traffic in the years from 1997 to 2015. Over this period, the number of passenger kilometres travelled is set to rise by 20% and the volume of freight moved by 64%.

We will increase the level of investment in transport. This will ensure that roads, railways and waterways are maintained and upgraded as required. To satisfy minimum requirements with regard to the maintenance and upgrading of transport infrastructure, we will budget significantly more funds for investment in federal transport infrastructure in the 16th electoral term and sustain funding at this level.

Federal funding of transport infrastructure is not to be interpreted as subsidisation. Rail transport is absolutely essential if we are to manage future traffic growth in a manner that is economically efficient and environmentally sound. We will continue to enhance the competitiveness and capacity of the railways.

If we wish to maintain and upgrade railway infrastructure and provide the network operator with a sound basis for planning, we have to significantly increase the funds available for railway infrastructure and sustain funding at this higher level.

New financial instruments

The coalition agrees that, in principle, all modes of transport are of equal importance. Funding must be targeted on those areas where there is an urgent need for action and where there are bottlenecks. With regard to the appropriations for roads, railways and waterways, we must retain the flexibility to re-allocate funds if necessary.

Our intention is to stabilise transport investment, thereby creating long-term planning certainty.

Our aim is to mobilise more private sector capital for the construction of transport infrastructure. To complement public sector infrastructure funding, we are adopting innovative approaches to funding using public-private partnerships (PPPs). With the introduction of the heavy goods vehicle tolling scheme, the establishment of the Transport Infrastructure Financing Company and the use of operator models, there now exists in Germany, for the first time ever, a wider range of sources for infrastructure funding. One of the ways of achieving this is by widening the terms of reference of the Transport Infrastructure Financing Company. We are reviewing its credit standing.

The costs of mobility have to remain socially acceptable.

Air transport - a growth industry

We support the air transport industry's "German Air Transport" initiative. The master plan for developing airport infrastructure will continue to be the basis for the future activities of the Federal Government, the Länder and the air transport industry.

Likewise, the Federal Government will evolve the "Airport Concept 2000" in consultation with the Länder.

We consider it to be our duty to evolve German airport infrastructure in order to enhance Germany's competitiveness on the international air transport market. Germany's role as a major air transport hub must not be weakened in global competition.

The capital privatisation of DFS Deutsche Flugsicherung GmbH (the German air navigation services), which has already started, is to be brought to a swift conclusion.

A level playing field in the road haulage sector

To support fair competition, we will ease the burden imposed on the road haulage industry by the HGV tolling scheme in a manner that is non-discriminatory. To this end, we will do everything we can to obtain European Commission approval for the toll rebate scheme, exhausting all legal options if necessary. Pending this approval, the lower toll rate will continue to apply ("toll compromise").

Transport infrastructure planning

We will press ahead with the projects identified in the Federal Transport Infrastructure Plan 2003 and the upgrading acts. Further priorities will be established when the fiveyear plan is prepared.

We will immediately draft a Federal Waterways Upgrading Act (Bundeswasserstraßenausbaugesetz).

We will progress implementation of the trans-European transport network projects, which make a major contribution to European integration.

We will promote innovative projects that are of special European and national interest.

We intend to press ahead with PPPs, and will thus use our best endeavours to ensure that the fixed Fehmarn Belt link is implemented as an international flagship PPP project.

Cycling

Cycling will be promoted in cooperation with the Länder and municipalities by implementing the National Cycling Plan.

Promoting local public transport

Good local public transport ensures that our towns and cities are able to function properly, enhances their liveability and is at the heart of a socially appropriate and environmentally sound range of mobility services. We will continue to provide an adequately high level of funding for local public transport.

State subsidies for local and regional passenger rail services will be used to fund local public transport and to enable it to perform its functions.

We will use the Local Authority Transport Infrastructure Financing Act (GVFG) to promote significant investment for upgrading local public transport and to provide investment assistance to municipalities. This assistance is indispensable and is making a major contribution to ensuring socially acceptable fares and to enhancing the attractiveness of public transport.

In this context, special attention has to be paid to the aspect of safeguarding the livelihood of small and medium-sized enterprises.

Fair conditions of competition, harmonisation

In the EU, the coalition will strongly advocate the comprehensive harmonisation of the conditions of competition and a further opening-up of transport markets in Europe. This will include:

• fully exploiting the scope for harmonisation that exists in Germany, in order to ease the burden on the transport industry;
• systematically pushing ahead with the harmonisation of levy regimes and rules; and
• reducing intermodal and intramodal distortions of competition, especially regarding state aid and derogations.

The coalition will support the European Commission's objectives as set out in the White Paper on the future development of the common transport policy. However, it will also seek to ensure consistent application of the principle of subsidiarity in the drafting and implementation of European legal instruments.

In all spheres of the transport sector, we will press ahead with intermodality, removing the barriers between modes, without placing an unreasonable burden on businesses.

6.2 Simplifying and speeding up transport infrastructure planning

We intend to facilitate and speed up the planning and construction of infrastructure.

We will introduce an act to speed up planning procedures (Planungsbeschleunigungsgesetz), thereby laying the foundations for streamlining, simplifying and shortening planning processes in a manner that is uniform throughout the country. We will seek to further speed up planning procedures, and in this context we intend to abolish special procedures and bring about a situation in which there are uniform procedures and decisions.

Our experience of speeding up planning procedures in the new Länder has been positive, and we will draw on this experience for the whole of Germany. The lessons we have learned show that simplifying planning is not detrimental to environmental protection and public participation. We want to include suggestions made by the Länder.

Plan approvals will be granted for 10 years, with the option of extending them once for a further five years. We want the Federal Administrative Court to be the only court that hears appeals against priority federal projects, on the basis of the bill submitted by the Federal Government.

This new planning legislation is due to enter into force early in 2006.

6.3 Continuing the reform of the railways

Germany needs modern, high-capacity railway infrastructure and efficient railway undertakings if the rail mode is to perform its important function in an integrated transport policy.

The Federal Government will support Deutsche Bahn AG as it continues its course of consolidation to help enhance its efficiency and competitiveness and to make it more customer-friendly. One of the main aspects here is to bring about a growth in the level of rail traffic. Non-discriminatory network access for Deutsche Bahn's competitors will be ensured.

The reform of the railways will be continued. Decisions on the future course of actionin the process of reform and on the organisation of the initial public offering of Deutsche Bahn AG will be taken on the basis of an analysis of the consultancy study to be presented to the Bundestag and with the participation of the appropriate parliamentary committees. In addition to capital market aspects, it will also be necessary to consider transport, financial, budgetary, economic and regulatory aspects, as well as aspects of European law and the Federal Government's obligation to provide infrastructure.

A service level and funding agreement for the existing network will ensure that the network is operational and that high-quality services are provided. The basis for this is the network condition report.

A more binding agreement than in the past will be concluded with Deutsche Bahn on implementation of the Federal Government's obligation to provide infrastructure in the construction of new railway infrastructure and in upgrading the network. This will include effective and transparent monitoring and mechanisms to ensure that the agreement is implemented.

In the European Union, we will use our best endeavours to ensure that national borders no longer constitute a obstacle to rail transport and will advocate crossborder competition.

Passengers' entitlement to compensation in the event of delays, cancellations, etc. in all modes of public transport will be laid down in law following analysis of the consultancy study on consumer protection that has been submitted.

6.4 Enhancing the competitiveness of the maritime industry and inland navigation

The maritime industry is a major factor in guaranteeing German competitiveness on the growing global markets. We intend to cooperate with the coastal Länder, businesses and trade unions to continue the approach adopted at the Maritime Conferences for enhancing the competitiveness of the maritime industry. To this end, it will be necessary, at European level, to remove international distortions of competition and to remedy shortcomings in harmonisation, exploiting all national scope for action in the process.

Competition between European ports is an important step on the road towards effective solutions, and must not be distorted by state aid. Our objective is to upgrade the necessary seaward and landside links to and from German seaports in a targeted and coordinated manner.

We will continue to make Germany a more attractive place for shipping companies.

We will preserve the instruments that have proved successful, such as tonnage tax and the withholding of wage tax at source.

The performance of the Maritime Security Centre will be evaluated after three years. This will also involve examining whether the existing approach is appropriate or whether we should seek to establish a "National Coastguard Service".

Safeguarding and preserving the competitiveness of the German inland navigation sector is one of the coalition's key concerns. Inland waterways are a mode of transport that is indisputably safe and environmentally friendly, and the role they play in the transport system as a whole will have to be enhanced significantly in the years ahead.

Well maintained waterways that are part of an integrated transport system are just as important to the inland navigation sector as they are to the efficiency of logistics chains.

We will take the Inland Navigation Forum's plan of action into consideration in our future activities.

The provision of tax incentives under Section 6b of the Income Tax Act (EStG), which was adopted by the Bundestag during the 15th electoral term, is to be embodied in law.

6.5 Promoting alternative fuels and powertrains, improving air quality and noise mitigation

To protect people and the environment and to secure the supply of energy for the transport sector, we will take initiatives to develop fuels and powertrains that have a promising future, to meet our international climate change obligations and to continue improving air quality and noise mitigation.

Because fossil fuels are finite, we will systematically press ahead with our fuel strategy - developing alternative fuels and innovative powertrain technologies with the aim of reducing our dependence on oil. We are committed to dialogue and cooperation with the industry in order to harness innovative capacity to an even greater extent. To this end, ongoing research activities will be expanded to form a research priority.

We will:

• provide revenue-neutral fiscal incentives for retrofitting motor vehicles with particulate traps and, starting in 2008, increase the tax on vehicles that do not meet this standard;
• introduce a straightforward method for marking vehicles in such a way that cleaner vehicles can be exempted from traffic restrictions, thereby providing an incentive to fit particulate traps;
• increase the toll rate for HGVs with high levels of emissions and reduce it for cleaner HGVs;
• Appropriate incentives are to be developed to encourage a reduction in emissions from light goods vehicles, taking care to ensure that they are not placed at a competitive disadvantage compared with foreign vehicles.

We will amend the Air Traffic Noise Act (Fluglärmgesetz), taking the interests of people who live near airports and of the aviation industry into consideration. To create legal certainty for projects involving airport expansion or the construction of a new airport, it will be necessary to lay down noise limits in law.

This policy is designed to help our towns, cities and regions evolve and to promote trade and industry while preserving the quality of life in residential areas.

6.6 Road safety

We have to continue our successful road safety activities with the same level of commitment as in the past. However, road safety cannot and must not be solely the responsibility of the state: it is also dependent on activities conducted by other stakeholders. This has to be our starting point, and we must encourage these individuals to get involved. In particular, we will provide assistance to people who are especially vulnerable, such as children, young novice drivers and the elderly.

We intend to continue our road safety programme in close cooperation with all partners engaged in road safety activities, intensify research and improve prevention as a whole.

Road safety education and road safety campaigns - in other words, mobility education - are part of the package of measures designed to enhance road safety.

6.7 Urban development as a future challenge

Urban development is an element of a modern structural and economic policy.

Urbanity, a multiplicity of uses and vibrancy are the hallmarks of German towns and cities. We will continue to support our towns and cities - including those in rural areas - in their endeavours to tackle demographic and structural change and to conserve the fabric of historic buildings.

Urban development assistance will continue to be a joint task of the Federal Government, Länder and municipalities. The funding programmes will create and safeguard jobs, because the investment made by the public sector will have a multiplier effect on private sector investment. The public and the property industry are to be involved in urban development decisions to a greater extent. To this end, we will seek to strengthen integrated approaches to urban development, especially their interlinking with other plans and measures.

To help towns and cities as well as the housing industry and public utilities in the new Länder to reduce the number of vacant dwellings and to adapt the technical and social infrastructure, we will continue our programme of urban restructuring in the new Länder and, after a mid-term evaluation, will decide how it should be continued beyond 2009.

To regenerate derelict urban sites resulting from the process of economic and military structural change, we will provide assistance to the towns and cities worst affected within the scope of the programme of urban restructuring in the old Länder.

We will consider how the two programmes of urban restructuring can be combined to form one programme in the medium term.

Towns and cities are making extensive use of the "Social City" programme, which targets neighbourhoods with development priority. It will continue to help stabilise urban neighbourhoods and encourage the people who live there to develop initiatives of their own, by involving them in local decision-making. This programme is to be evolved and will focus on the statutory objectives. There is to be improvement in the way in which it is combined with funding available from other government departments.

Our programme to protect the urban architectural heritage has saved the historic town centres in the new Länder from decay and revitalised them. We will continue this programme and consider when we can include the historic towns and cities of the old Länder.

To reduce land take and speed up major planning projects, especially in the spheres of jobs, housing need and infrastructure provision, we will simplify and speed up building and planning law procedures for relevant projects in order to boost inner urban development.

We will preserve and, if necessary, widen the legal framework to ensure that town and city centres remain attractive sites for retail outlets and to strengthen the local economy and widen the diversity of uses. We will continue the "City 21" initiative in cooperation with the Länder, local government associations and retail associations.

To manage demographic change and migration, we intend to launch pilot projects to assist towns and cities in designing neighbourhoods that cater to the needs of children and families and in converting their infrastructure to make it accessible for the disabled and the elderly.

We intend to help towns and cities in their efforts to link up walking, cycling, public transport and car traffic in urban residential neighbourhoods in such a way that residents enjoy mobility but are not exposed to excessive traffic noise.

6.8 Building and the construction sector as a key industry

The building sector is a key industry for growth and employment. In 2005, the real construction volume is around €220 bn. The construction industry continues to be the most important branch of the economy in Germany. This sector accounts for over 50% of all investment. Public and private sector investment is to be facilitated in order to speed up the modernisation of infrastructure in Germany.

We will continue to improve the legal framework and other conditions governing public-private partnerships (PPPs) in building and civil engineering. The number of pilot projects is to rise and the activities of the existing PPP Task Force will be stepped up. This will enable us to develop uniform contractual structures and to introduce generally accepted rules for an economic assessment within the framework of procurement.

We will assist the construction industry in developing "Construction Industry Vision and Values" as an overall framework for a modern building policy that uses innovation and quality to safeguard investment and jobs with a secure future.

The Federal Government's building research activities will be stepped up and better linked to European networks.

We intend to press ahead with the establishment of a Building Culture Foundation (Federal Building Foundation). Its purpose will be to make the public at large more aware of just what good design and building can do to make towns and cities more vibrant. In addition, we also have to publicise the high level of skill and capabilities of German architects and engineers on the world market.

We will simplify the Fee Schedule for Architects and Engineers (HOAI) and make it more transparent and flexible, as well as incorporating even greater incentives for low-cost and quality-conscious building.

To speed up public sector investment, we will amend public procurement legislation within the framework of the existing system. The EU rules developed for large-scale projects should only be used for major projects, so as not to block the large number of smaller investments that are important for small and medium-sized enterprises.

The Contracting Regulations for Construction Works (VOB) and Services (VOL) enable the public sector to conduct efficient and economical procurement. For this reason, the simplification of public procurement legislation must target qualitative aspects and cater to the needs of small and medium-sized enterprises, while retaining the Contracting Regulations for Construction Works.

We will press ahead with the reform of the Federal Building Administration. The objective is to continue optimising it while preserving the unity of the building administration for civil and military projects. We will retain the core technical competencies of the building administration and focus them on construction management tasks.

6.9 Energy-efficient building to help tackle climate change

We want to reduce the consumption of resources in the building sector and lower service costs, in order to help tackle climate change while providing an impetus for more employment. One priority will be the maintenance of the structural fabric and modernisation of the housing stock to adapt it to people's changed housing requirements and to reduce energy consumption.

We intend to increase the number of contracting projects on federal property. We will launch a programme to improve the energy efficiency of public buildings owned by the Federal Government. In addition, we intend to make greater use of the proceeds from the sale of surplus public sector property for the purpose of carrying out the necessary modernisation of the remaining properties, thereby preserving the value of federal property assets.

6.10 Housing

Owner-occupied housing, rented accommodation and cooperative housing will remain the three pillars of housing provision.

Housing benefit will continue to play a role in ensuring that housing is provided for lower income groups. Housing benefit is a welfare benefit, not a subsidy. The Federal Government and Länder will speedily review housing benefit legislation with the aim of significantly simplifying it.

Our policy objective will remain the creation of home ownership for families with children. An active family policy, in the interests of the sustainability of our society, must support people's desire to have children by providing a supply of housing that caters to the needs of families. To this end, we will work together with the KfW Promotional Bank to identify how the granting of lower-priority mortgages can be simplified and the loans made less expensive. This will also make it easier for tenants to purchase their dwellings.

Home ownership is to be better integrated into state-sponsored retirement provision.

We will evolve cooperative housing on the basis of the recommendations made by the Group of Experts on Housing Cooperatives.

We will carefully analyze the internationalisation of the housing industry as regards its impact on society, urban development and the construction industry.

7. Environment

The CDU, CSU and SPD are guided by the principle of sustainable development. An intact natural environment, pure air and clean waters are a prerequisite for a high standard of living. We consider environmental protection to be a joint task for the government, citizens and industry. We trust in cooperation and a combination of direct responsibility of private enterprises and citizens, in market forces and competition and in the necessary binding legal norms and their effective enforcement. An ambitious national environmental policy can contribute decisively to the modernisation of our society. It can be a driving force for

• the development and global marketing of future technologies,
• improving energy and resource productivity and thus the competitiveness of the German economy,
• creating new skilled and secure jobs.

We are facing great challenges resulting from the dangers of climate change and the foreseeable price and distribution conflicts concerning energy and raw materials.Therefore Germany and Europe need a new approach combining the objectives of successful economic development and effective climate and environmental protection with the social needs of people - the sustainable economy of the 21st century.

The most important element thereof is the dual strategy to increase energy and resource efficiency and to expand the use of renewable energies and regenerative raw materials. In the context of a broad energy mix, this is the most promising path towards strengthening the international competitiveness of German industry, reducing the burden on consumers and companies caused by rising energy and raw material prices and at the same time protecting the earth's atmosphere and the environment.

7.1 Climate protection and energy - a strategy, a programme

Germany will continue to play its leading role in climate protection. Our goal is to restrict the increase in the global temperature to a climate-compatible level of 2°C as compared with pre-industrial levels. We therefore intend to:

further develop our national climate protection programme and introduce additional measures to ensure Germany reaches its Kyoto target for 2008 to 2012;

support the establishment of an international climate protection regime for the post 2012 period by 2009, building on the Kyoto Protocol;

support the inclusion of other industrialised countries and economically advanced newly industrialised countries in a new climate protection regime and the adoption of corresponding commitments by these countries in line with their capabilities;

propose that within the framework of international climate protection negotiations the EU commits itself to a 30% reduction in its greenhouse gas emissions by 2020 compared with 1990 levels. On this condition, Germany is willing to strive for an even greater reduction in its emissions;

evaluate the climate protection agreement concluded with industry in 2000;

strive for a partnership on climate and innovation with German industry and civil society, which opens future markets worldwide for small and medium-sized enterprises in particular;

promote a new partnership between industrialised and developing countries, based on the G8 initiative, that is geared towards an ambitious modernisation of energy supply for greater energy efficiency and the increased use of renewable energies. This partnership should supplement a binding climate protection regime, but in no way replace it;

beyond this, strive for an international afforestation programme in order to make use of the carbon sequestration ability of forests.

7.2 Emissions trading

Emissions trading is an important instrument of climate protection. We will make it ecologically and economically more efficient and therefore:

• draw up the National Allocation Plan for the period 2008 to 2012, building on the targets as defined in the Allocation Act (Zuteilungsgesetz) 2005/2007, avoid windfall profits and give special consideration to the international competitiveness of the energy-consuming industry;
• make the allocation system more transparent and less bureaucratic and, where this is possible under European law, exempt small installations;
• enhance the opportunities of German industry on foreign markets by making it easier to use international climate protection projects according to the Kyoto Protocol (such as JI and CDM);
• support the EU Commission in studying how to integrate air traffic appropriately into the emissions trading;
• promote the participation of other industrialised countries and large newly industrialised countries in worldwide emissions trading;
• ensure that there will be incentives for the construction of efficient and environmentally friendly power stations in the second allocation period.

We want to lower the expense burden for industry through CO2 emissions trading. To this end, we will, if necessary, support a revision of the EU Emissions Trading Directive. In the update of the National Allocation Plan 2 (2008-2012) we will give special consideration to the international competitiveness of the energy-consuming industry. The allocation system must become more transparent and less bureaucratic and other industrialised countries and large newly industrialised countries must be included in emissions trading. In order to increase the flexibility of the CO2 emissions trading, it is necessary to speedily implement the flexible Kyoto mechanisms (such as JI and CDM).

7.3 Reorganisation of environmental law

In European and German environmental law, we focus on achieving a high level of protection of health and the environment with regulations that are as unbureaucratic and cost-effective as possible and on strengthening our industry's innovative ability and competitiveness. This also holds true for the current negotiations concerning the registration, evaluation and authorisation of chemicals (REACH).

An act to speed up planning procedures will create the necessary conditions for streamlining, simplifying and shortening planning processes nationwide without undermining environmental protection or participation of civil society. We want to build on the positive experiences gathered in planning acceleration in the new Länder which show that this is possible.

Our current environmental law has developed over time and is highly fragmented both with regard to subject matter and between the Federal Government and the Länder. This does not meet the requirements of an integrated environmental policy:

• We want to simplify German environmental legislation and compile it in an environmental code.
• We want to replace the different licensing procedures with an integrated project authorisation in the context of an environmental code.
• The Federal Government will launch an initiative in Brussels for the necessary internal harmonisation and simplification of European environmental law.
• WTO and other trade agreements must not be given priority over agreements on the protection of the environment.

We will create the prerequisites for such a reorganisation of German environmental law in the context of the reform of the German constitution, the Basic Law (reform of the federal system of government).

7.4 National natural heritage

Our country has a rich natural heritage. We want to preserve it for future generations.

We need a new partnership between nature conservation, sustainable agriculture and eco-tourism. We will therefore:

• transfer free of charge about 80,000 to 125,000 hectares of nationally representative nature conservation areas in federal possession (including the "green belt") to a federal foundation (preferably the DBU - German Federal Foundation for the Environment) or to the Länder; an immediate freeze on sales will be prescribed to secure the natural heritage in the short term.
• strive for a reduction in the spread of land use to 30 hectares/day by 2020 in line with the National Sustainability Strategy (Nationale Nachhaltigkeitsstrategie) and develop financial incentive instruments for land resource management;
• improve nature conservation by introducing a national strategy and combine it with sustainable use;
• take a common-sense approach to the implementation of the Natura 2000 Directive in the framework of European law;
• ensure, where reasonable, the protection of semi-natural habitats by applying cooperative solutions, in particular contract-based nature conservation measures. Where necessary, we will apply legal measures;
• preserve and develop our rivers and alluvial meadows in their function as arteries of landscape and as important elements of preventive flood control.
  

7.5 Transport and immission control

In order to reduce fuel consumption of vehicles and CO2 emissions of the total road traffic, we will

• create effective incentives for the introduction of high-efficiency engines by linking the vehicle tax to CO2 and pollutant emissions;
• support the commitment of ACEA (European Automobile Manufacturers' Association) to limit the average CO2 emission of new vehicles to 140g per km by 2008. We propose that the use of biofuel can be included, up to a certain percentage, in the additional reduction to 120g CO2 per km proposed for 2012;
• promote the development of alternative fuels and innovative engine technologies in cooperation with industry with the objective of a move away from oil.

We want to reverse the trend regarding noise exposure of the population, especially from traffic noise. We will therefore draw up a noise reduction programme for existing federal trunk roads and railway tracks. At national level, we consider amending the Air Traffic Noise Act (Fluglärmgesetz) to be a priority.

7.6 Waste, water

The CDU, CSU and SPD will give new impetus to an environmentally friendly closed substance cycle at the European and national levels. We need a uniformly high level of environmental protection in Europe with ambitious standards for waste management in order to put an end to environmental dumping by cheap waste management.

We will further develop waste management towards a sustainable and resourcesaving materials management, building on the instrument of product responsibility as regulated in the Closed Substance Cycle and Waste Management Act (Kreislaufwirtschafts- und Abfallgesetz).

Municipalities will continue to be able to decide independently on the organisation of water supply as well as waste and wastewater management. We intend to maintain the tax privileges for wastewater and waste management.

The Federal Government and the Länder will implement the European Water Framework Directive in close cooperation and strive jointly for a harmonised approach at the European level. The protection of water bodies and the preservation of their ecological functions laid down in the directive have to be taken into consideration when building and maintaining federal waterways.

7.7 Sustainable development

Promoting sustainable development is our goal and the standard by which our actions will be measured, at the national, European and international levels. We will pursue and further develop the National Sustainability Strategy. We will also maintain proven institutions, such as the Committee of State Secretaries for Sustainable Development (Staatssekretärsausschuss für Nachhaltige Entwicklung) in the Federal Chancellery, the Council for Sustainable Development (Rat für Nachhaltige Entwicklung) and the Parliamentary Advisory Council (Parlamentarischer Beirat).

8. Agriculture

8.1 Promoting rural development and German agriculture

We want Germany's farming, forestry, fisheries and food sectors to thrive and improve their competitive standing. These sectors yield great added value, secure jobs in largely rural regions and play a vital role in securing the supply of food, raw materials and energy, in maintaining and conserving the cultural landscape, and in stabilising rural communities and economies.

This vital role must be underpinned with fair and dependable governance. We will boost the competitive standing of these sectors and reduce bureaucracy. As an economic sector based on medium-sized enterprise, farming and other segments of the agricultural economy secure around four million jobs and generate some seven per cent of gross domestic product.

All farming enterprises must be afforded equal market opportunities independent of their size, production profile and legal form. We reject size-based capping. In terms of reducing bureaucracy, we emphatically support the EU Commission's plans to produce an action plan for 2006 and will implement the National Action Plan for German Agriculture: Fostering Innovation and Reducing Bureaucracy. In drawing up the plan, the Federal Government will set up a working group headed by the Federal Ministry of Food, Agriculture and Consumer Protection and comprising representatives from the governing parliamentary groups in the German Bundestag  and the sixteen Land governments.

The Federal Government will consider the competitive standing of Germany's farming and food industries in all budgetary and taxation decisions. We will secure and enhance added value and employment in rural regions. This is best achieved with a cross-sectoral approach. The Federal Government will present a German Rural Development Strategy and make it the focus of in-depth dialogue.

The "Joint Task for the Improvement of Agricultural Structures and Coastal Protection" must continue, with the ultimate aim of boosting both conventional and organic farming.

In all future administration and privatisation of former state-owned land in Eastern Germany, we will consider the agricultural structures and needs of the region.

We call for the telecommunications sector to step up efforts to provide a modern communications infrastructure for our rural regions.

8.2 A dependable framework for EU agricultural policy

The last decade has seen fundamental reforms in EU agricultural policy. The Federal Government welcomes this new approach.

In the interests of German agriculture and consumer protection, we call for fair market conditions in all regions within the European Union. This includes EU-wide harmonisation, at the highest possible level, of standards for consumer and environment protection and animal welfare. The competitive standing of Germany's farming and food industries must be taken into account in all decisions made at EU level and in their national implementation. The locational advantages gained by German agriculture in process and product quality will not be compromised and must be further enhanced.

For reasons of planning certainty and dependability, the Federal Government upholds the unanimous decision reached by the European heads of government and state in October 2002 on financing the first pillar of EU agricultural policy. Secondpillar financing must be adequately safeguarded and balanced development of the two pillars must be secured.

8.3 Agricultural trade and a successful outcome to WTO negotiations

We want a positive outcome from the Doha Development Rounds. With its agricultural reform in July 2003 and the July 2004 Package of Framework Agreements, the EU has performed much of the groundwork and has thus increased the chances for success.

The WTO negotiations must be brought to a successful conclusion in all sectors simultaneously. Liberalisation of agricultural trade should not be the sole outcome. For farming, the aim of the negotiations is to reduce distortion of agricultural trade worldwide so as to give developing countries a larger share of the global market. In principle, this requires the abolition of all forms of export subsidies. At the same time, we intend to improve market access for developing countries' products, among other things by cutting customs duties.

In the current round of WTO negotiations, we aim to create opportunities for the European agricultural model with its high farming standards. Given that in many cases compliance goes unrewarded by the markets, we call for the retention of the non-trade distorting "green box" subsidies. Adequate external protection must, however, be guaranteed. We thus intend to make Europe's high standards of animal welfare, nature conservation, environmental protection and food safety an integral component of the negotiations.

8.4 Securing the agricultural social security system

The independent system of agricultural social security can only be maintained and secured over time if its systems are modernised and its contributions and services made equitable, aligned with other welfare systems and gradually linked to generic social security systems.

Given the increasing structural changes in farming and, in a more general context, the planned reform of Germany's social security systems, the coalition parties have agreed the following:

• Retention of the Agricultural Social Security Reform Act (Agrarsozialreformgesetz) of 1995, which ensures that contributions paid into the Farmer's Pension Fund are based on the same ratio of contributions to benefits applied under the state pension scheme.
• Further development and reform of current legislation on farmers' health and accident insurance to make contribution payments both adequate and equitable throughout the farming sector. Provision of federal funding must take account of the structural conditions specific to farming.
• Analysis of the structural reform agreed in 2001 and modernisation of organisational structures.

8.5 Promoting use of renewable resources

We see huge potential for the use of renewable resources in agriculture. The Renewable Energy Sources Act (EEG) along with activities in research and development and in the marketing of renewable energy sources have opened up opportunities that give farmers a range of major new perspectives. Further opportunities come in the form of feeding biogas into the energy supply grid and notably in the use of renewable resources. The Federal Government will ensure that the use of renewable resources in industrial processes, energy production and the production of goods is further exploited as a key development opportunity for agriculture in particular and thus for sustained value creation in rural areas. We will actively foster interdisciplinary research in this area.

8.6 Active animal welfare policy

With animal welfare enshrined as a national policy aim in the German Basic Law, we have both an obligation and a framework for engagement in proactive animal welfare policy.

We will lobby at EU level for adoption of high animal welfare standards that accord with this aim and thus where possible do away with the need for supplementary regulation at national level. We aim to reduce the incidence of live animal transports, shorten journey times and improve livestock transport conditions.

Development of available alternatives to animal testing must be stepped up at both national and European level. We thus advocate alternative methods to ensure that animal testing is no longer a necessary component of substance risk assessment.

Using a practice-focused testing and approval process for mass-produced housing facilities for humane livestock husbandry, we will effect fundamental and lasting improvements in husbandry conditions.

We uphold the ban on keeping laying hens in battery cages and will allow animal keepers to adopt other forms of humane husbandry alongside floor housing and freerange production. Due consideration will be given to the findings of the report on the impact on animal welfare of current housing and husbandry systems to be published by the EU Commission at the beginning of 2006.

The Federal Government will present a draft pig husbandry ordinance in the near future in compliance with the pertinent Bundesrat resolution.

8.7 Sustainable forestries and fisheries

The Federal Forest Act (Bundeswaldgesetz) has proven effective overall. The Act's provisions on sustainable forest management will, however, be revised for greater clarity and measures will be taken to overcome the structural disadvantages faced by non-state forestries. The Wood Charter will be implemented. The Federal Government welcomes certification of sustainably managed forests and will continue to use wood procured solely from certified stocks. Both the Federal Forest Act and the Federal Hunting Act (Bundesjagdgesetz) are to remain a federal responsibility.

The Federal Government sees a need for further development in fisheries as a growth sector.

In the ongoing development of European Fisheries Policy, the Federal Government will strive to subject natural fish stocks management to the principle of sustainability and in particular to subject industrial fisheries to stronger regulation that is subordinate to management strategies applicable to all other fisheries, and will promote further development of catch technologies towards maximum selectivity.

We will work to ensure that the ban on commercial whaling is upheld.

8.8 Connecting agricultural research

German agriculture relies on home-grown agricultural research that produces effective results. We will thus work with the research community and the Länder to develop and implement an overall plan to secure agricultural, food and consumer esearch over time, to adapt available resources to meet the challenges ahead, and to make them more efficient and better connected.

8.9 Responsible use of green genetic engineering

Biotechnology is a key future sector in research and industry and is already established worldwide. Protecting people and the environment, as called for by the precautionary principle, remains the primary objective of German genetic engineering  legislation. Freedom of choice for farmers and consumers and the coexistence of differing management practices must be safeguarded. Genetic engineering law will provide the framework for further development and use of biotechnology in all areas of everyday life and industry.

We will implement the EU Deliberate Release Directive in a timely manner and will amend Germany's Genetic Engineering Act (Gentechnikgesetz). The legislation will be structured in such a way as to promote research into and use of genetic engineering in Germany. In doing so, it is vital that legal definitions (particularly release and placing on the market) be clearly worded. The Federal Government will strive to ensure that the industrial sectors involved establish a compensation fund to cover any loss or damage that may arise despite their compliance with all precautionary obligations and best practices. The longer-term goal is an insurancebased solution.

9. Better regulation

9.1 Reducing the costs of regulation for the public and for industry

The desire to ease the burden on individuals, businesses and the administration alike of the strains caused by overregulation and the attendant burdens of regulatory requirements and costs is an important concern of the coalition.

To this end, the new Federal Government will introduce the Small Company Act as an immediate measure to amend current legislation. This Act will free companies from excessive regulation which is especially growth-inhibiting and will afford SMEs, and start-ups in particular, more breathing space. The most pressing issues here include reducing obligations with regard to statistics, certification, documentation and accounting; simplifying and accelerating planning and approval procedures; reducing double and multi-audits; harmonising thresholds such as those in tax and accounting rules; limiting the obligation of businesses to appoint officers for certain areas; simplifying the requirements on small businesses as regards company medical service and security; and easing the regulatory requirements in existing support programmes.

The past has shown that any attempt at regulatory reform by abolishing individual legislative provisions alone is not enough to eliminate red tape and ease the resulting financial burdens on SMEs in particular. In this, the fact that no method has as yet been adopted in Germany by which present costs of regulation can be measured reliably and the impact of any new regulation assessed with certainty has proven to be a significant obstacle.

However, experiences in other countries, particularly in the Netherlands, have shown that such an assessment is possible. Only once this information is in place can the reduction in the costs of regulation be measured. The Federal Government will implement the recommendations of the European Union and of the OECD, and introduce without delay the Standard Cost Model, which has enabled many European countries to provide an objective analysis of the effect of regulation on business. The Federal Government will then arrange for such an impact assessment of existing federal laws to be carried out. Once the results have been obtained, the Federal Government will define a specific goal in terms of reducing regulatory costs by the end of the electoral term.

This process will be accompanied by the appointment of the Council for the Review of Legal Norms (Normenkontroll-Rat), a panel of independent experts advising the Federal Chancellery and tasked, inter alia, with assessing legislative proposals of the Federal Government and the coalition parliamentary groups in terms of their necessity and with respect to the related cost. In addition, the Council has the right to single out laws which, in its view, are superfluous or run contrary to other principles of good regulation, and to submit a reasoned opinion on the issue to the Cabinet. The chair of the Council may present this body's views directly to the Federal Chancellor or, alternatively, to the Head of the Federal Chancellery.

In line with the recommendations of the European Commission's "Mandelkern Report", the Federal Government will monitor legislation at the European level from the earliest stages of its preparation with the same attentiveness it applies to the transposition of European legislation into national law. In future, the introductory page to every bill transposing European law into national law will set out in detail the relation between the individual provisions and EU rules, and provide information on the extent to which other Member States have transposed the relevant provisions into national law.

9.2. Accelerating and deregulating planning procedures

We intend to facilitate and speed up the planning and construction of infrastructure.

We will introduce an act to speed up planning procedures, thereby laying the foundations for streamlining, simplifying and shortening planning procedures in a uniform manner throughout the country. Our experience of speeding up planning procedures in the new Länder has been positive, and we will draw on this experience for the whole of Germany. The lessons we have learned show that simplifying planning is not detrimental to environment protection and public participation. We want to include suggestions made by the Länder.Plan approvals will be granted for 10 years, with the option of extending them once for a further five years. We want the Federal Administrative Court to be the only court that hears appeals against priority federal projects, on the basis of the bill submitted by the Federal Government. The new planning legislation is due to come into force early in 2006. To ensure that this does not lead to regulatory gaps with regard to the existing legislation to speed up transport infrastructure planning procedures, the present act is to be extended until the successor act enters into force.