New voices join calls to relax German budget cuts

By Sarah Marsh

BERLIN (BestGrowthStock) – Regional German governments and politicians from Chancellor Angela Merkel’s coalition parties are joining protests against planned austerity measures, media reported on Saturday.

A day after German industry launched a concerted attack on Merkel over her proposal for a tax on nuclear power providers, Der Spiegel said that regional governments were planning a joint protest against cuts in funding for urban development.

Construction ministers from states governed by Merkel’s conservatives as well as those led by the opposition Social Democrats aim to resist cuts worth 2.4 billion euros ($3.1 billion), the weekly news magazine said.

These measures would lead to a halt in investment and threaten jobs and tax revenues, the magazine cited a working paper of the ministers as saying.

Merkel’s center-right government has agreed a four-year, 80 billion euro austerity plan to slash the budget deficit.

This push has drawn criticism from politicians at home and from some of Germany’s euro zone partners, who say it is unwise to withdraw fiscal stimulus from an economy still recovering from its deepest post-war recession.

Although support for the budget cuts has plunged in recent weeks, the government is sticking to its guns and plans to lay out details on implementation at the start of September.

Energy policy is a particular area of contention at a time that the cabinet is also preparing to unveil its long-term energy plans.

Industry bosses and members of Merkel’s own Christian Democrats (CDU) urged her in an open letter on Friday to drop her plan to tax nuclear power providers, saying it would put Germany’s future at risk.

Michael Fuchs, a deputy head of the CDU in the lower house of parliament, has also urged the government not to pursue its plan to reduce tax breaks for large corporate energy consumers.

“We cannot push energy-intensive companies away from this country with the environmental tax,” he told Der Spiegel.

TAX RELIEF?

Germany’s robust recovery also has prompted the pro-business Free Democrats (FDP), junior coalition partners in Merkel’s center-right government, to reiterate calls for tax relief for middle-income earners.

“We can get rid of the solidarity tax (for investment in former East Germany) and relieve citizens by 12 billion euros without threatening the consolidation of state finances,” FDP finance expert Frank Schaeffler was cited as saying in Wirtschaftswoche magazine on Saturday.

The German economy grew at the fastest rate since reunification in the second quarter as companies stepped up investment and exports surged.

The FDP had campaigned on a ticket of tax relief, yet Merkel put aside the idea during the euro zone debt crisis and has said she still sees no scope for tax cuts over the next two years.

Finance Minister Wolfgang Schaeuble has also made it clear that consolidation remains the fiscal priority and on Saturday also lowered hopes for a broad simplification of the tax system.

“Many proposals for tax simplifications cannot be carried out without causing a considerable shortfall,” Schaeuble was cited as saying by Der Spiegel.

(Editing by Jane Baird)

New voices join calls to relax German budget cuts