Matthias Platzeck is right. The designated chairman of the Social Democratic Party (SPD) said that the alliance between his party and Germany's conservatives -- the Christian Democratic Union (CDU) and its Bavarian sister party the CSU -- isn't a true political romance. "This is a sober marriage of convenience," he told an assembled horde of reporters at a press conference on Saturday, as he sat next to future chancellor and CDU leader Angela Merkel.

However, that voters foisted this passionless union on Berlin's politicians isn't necessarily a bad thing. Indeed, many Germans hoped such a broad bipartisan effort could help get the world's third largest economy back on track. So it was with much interest that the country watched as Merkel and Platzeck gathered over the weekend to present the grand coalition's policy priorities.

With Germany struggling under the strain of chronically meager growth and high unemployment, no one was expecting lots of sweetness and light. Merkel even admitted they would be "asking at lot of people" in terms of sacrifice. But in the days following, the rather hefty 191-page coalition agreement has been criticized from several corners for too eagerly dipping into taxpayers' pockets while not having the courage to take bold steps to overhaul the troubled economy.

The taxman cometh

The conservatives pushed through an increase in Germany's value-added tax (VAT), but were forced to agree to raise the tax rate on the rich in return. The Christian Democrats want to use part of the added revenue from the VAT, which will rise from 16 to 19 percent in 2007, to lower the country's non-wage labor costs with the aim of encouraging job growth.

However, since a consumption tax like the VAT hits the less fortunate proportionally more than the wealthy, the Social Democrats fought for a new tax on the rich. The highest income tax rate will rise from 42 to 45 percent for all those earning more than €250,000. For married couples the limit will be €500,000.

But increasing government revenues won't be enough to plug Germany's gaping budget deficit -- estimated to hit €41 billion next year -- so the coalition is also planning to cut spending too. In an effort to help deal with Germany's rapidly aging population, contributions to the state pension system will rise in 2007 to 19.8 percent from 19.5 percent of gross wages. Pension payments are also likely to be frozen for the next four years and the retirement age will slowly be pushed back from 65 to 67.

More steps needed

Controversial areas such as reform of the health system were simply left off the negotiating table for the time being. For many observers, that makes the coalition agreement nothing more than a bitter emergency program to consolidate Berlin's finances, having none of the sweeping changes so desperately needed to revamp Germany's creaky welfare state and reignite the economy.

Hans-Werner Sinn, the head of the Munich-based Ifo economic institute, even said the coalition program was more likely to slow the economy and would hardly create any new jobs. "It's correct and important that the state borrows less, but it's wrong to make citizens pay for it with new and higher taxes," he told the daily newspaper Bild.

Germany does, of course, need to get its finances in order if it ever hopes to meet EU budget criteria rules again, and the tax increases will help. But considering consumer demand in Germany has floundered for years, it does seem somewhat odd to be slapping a higher VAT on nearly everything purchased in the country. That some economists foresee people buying big-ticket items next year before the tax hike kicks in 2007 is sure to be a fleeting blip for the economy.

Merkel has said that job creation would be her priority, but the business community has also been disappointed despite the new government's plans to loosen restrictive job-protection measures and lower labor costs. "Clear signals for creating more jobs are lacking," said Ludwig Georg Braun, the president of the DIHK German Chamber of Industry and Commerce. "There are no key reforms of the labor market and for social security system and corporate taxation they are only in the planning stage."

Grand enough?

Plenty of criticism has come from inside the ranks of the conservatives and SPD, however, the coalition contract was still assured overwhelming support at all three separate party conferences on Monday. But will this coalition be able to live up to its "grand" moniker? Is it a "true chance" for reform as Angela Merkel says, or will it simply be a government of the lowest common denominator that many fear?

Only the coming months will tell. But the fact that two sides that are natural political rivals are even working together is an important step in the right direction. Germany has been without a completely functioning government since last spring. If the conservatives and the SPD had failed to cobble together their coalition over past six weeks, the country would have faced the gruesome prospect of waiting until next year for new elections.