UPDATE 2-Merkel defends nuclear tax in scrap with industry

* Merkel says nuclear tax stands so long as no alternative

* Merkel, with ratings low, faces tough return from recess

* Merkel open to suspension of compulsory military service

(Adds Westerwelle)

By Holger Hansen and Sarah Marsh

BERLIN, Aug 22 (BestGrowthStock) – German Chancellor Angela Merkel
on Sunday stood by her plan to levy a tax on nuclear power
providers, pitting her coalition against industry in a turbulent
return to government business after the summer lull.

The nuclear tax is one of a number of contentious issues
facing Merkel, who has failed to capitalise on the strong
recovery in Europe’s largest economy to drum up support for her
reforms, including budget cuts and an overhaul of the military.

Merkel said she was open to a suspension of Germany’s
compulsory military service, a topic of heated debate within her
coalition which has become notorious for its bickering.

Merkel hopes the nuclear tax will raise 2.3 billion euros a
year as part of a 80 billion euro austerity drive that she is
determined to press ahead with, keen to set an example of fiscal
discipline for other euro zone countries to follow.

“We have proposed a tax,” Merkel told ZDF television in her
first major interview since returning from her summer break.

“So long as there is no other proposal on the table, the tax
remains.”

Merkel defended the tax plan after industry bosses and
members of her own Christian Democrats (CDU) ramped up pressure
on her on Friday to drop the plan. [ID:nLDE67J0IG]

Merkel, a former environment minister under Helmut Kohl,
told ZDF her government was in talks with the energy companies
about other potential proposals “but I don’t yet see any”.

Although the nuclear tax is part of the budget consolidation
drive, Merkel’s centre-right government is also preparing to
unveil its long-term energy plans at the end of September.

Surveys have long shown that most Germans oppose nuclear
energy, making it a sensitive area for Merkel’s government,
which has pledged to extend the lifespan of nuclear power
stations, even though it has yet to agree on how much.

Foreign Minister Guido Westerwelle told ARD television on
Sunday that an extension of 10 to 15 years looked likely.

SUPPORT LOW

With military reform on the agenda, Defence Minister
Karl-Theodor zu Guttenberg is to present a plan for cutting
costs and modernising the Bundeswehr on Monday.

Guttenberg is widely expected to favour a scheme that would
see the army shrunk and mandatory military service suspended —
against the wishes of others within Merkel’s conservatives.

Merkel said she would support any proposals which would
safeguard the future of the Bundeswehr. “A re-think of the role
of military service should not be ruled out,” she told ZDF.

Merkel and her government’s approval ratings have sunk
sharply since she was re-elected last year at the head of a new
coalition of conservatives and liberals which has had to drop
campaign promises of tax cuts and feuded over reforms.

A poll published last week showed Merkel’s Christian
Democrats had been overtaken by the centre-left Social Democrats
for the first time since the federal election. [ID:nLDE67H0KC]

“I think we haven’t managed to reach people partly because
the confusion of voices and the way we have treated each other
have not been what is to be expected of us,” Merkel said. “This
too will therefore be improved.”
(Writing by Paul Carrel and Sarah Marsh; Editing by Angus
MacSwan)

UPDATE 2-Merkel defends nuclear tax in scrap with industry