Germany goes in for tax cuts

The German cabinet approved sweeping income tax cuts on Sunday to enhance consumer demand and end three years of slow economic activity.

Schroeder: The 2004 budget
should not violate EU rules

German Chancellor Gerhard Schroeder said his cabinet approval was an attempt to kickstart Europe’s largest economy.


“We want a signal of revival to go out from this weekend to the people in our country,” Schroeder told a news conference.


“This government is improving the conditions for more growth,” he said.


Trimming taxes for consumers would be financed by a shrink in government subsidies, new borrowing and possibly revenues from the sale of shares in ex-state monopolies, Schroeder said.


He did not provide precise figures.


However, Schroeder said the 2004 budget should not violate European Union budget rules.


The rules require that the deficit be below 3% of Gross Domestic Product (GDP).


Germany failed to meet that limit in 2002 as its deficit rose to 3.6%.


Experts say it would continue to exceed the limit again this year.


Workers’ strike fails


Meanwhile, thousands of striking German metal workers were set to resume working after their powerful union failed to push through their demands for a 35-hour working week.


The IG Metall Union was expected to endorse the decision by its negotiators to cancel a four-week strike in eastern Germany.


Schroeder expressed his relief over the end of the stoppage.


“The economic impact would have aggravated the difficulties we are facing, and that is why I’m very happy that it is ending”, he said.


IG Metall’s failure to win demands from a stoppage is the first such setback in half a century of talks with successive German governments.