New German coalition plans tax cuts

Chancellor says the CDU-FDP coalition is Germany's "answer" to the economic crisis.

    Angela Merkel said the new cabinet would focus on growth and tax relief [AFP]

    Soaring budget deficit

    The announcement of income tax cuts of about $36bn, which are said to designed to spur economic growth, came at a time when Germany's budget deficit is soaring.

    in depth

      Merkel wins German election
      Germans 'face post-election shock'
      Germany's parties and politicians
      Germany's economic vote

    The country spends tens of billions of euros in interest payments on its debts each year, and it will borrow hundreds of billions more over the next few years.

    Germany's economy has been hit hard by the global slowdown, triggering its worst recession since the foundation of the Federal Republic in 1949.

    Wolfgang Schaeuble, a CDU member and veteran interior minister, was named as the new finance minister after the coalition deal was struck.

    Before the election, he indirectly criticised Merkel's pledged tax cuts, saying there was little room for them given Germany's strained finances.

    But following announcement of the tax cuts, Schaeuble told ARD public television: "We will have to accept another exceptionally high debt."

    "But at the same time we have to remember that as soon as the crisis is overcome we must reduce this excessively high debt," he said.

    Nuclear weapons

    Guido Westerwelle, the FDP leader, was set to become vice-chancellor and foreign minister in the new cabinet.

    He vowed non-proliferation as his priority, including the withdrawal of the US nuclear warheads stationed in Germany since the Cold War.

    "Foreign policy is not only about continuity, but also about new beginnings. That's why I am glad about an agreement of the coalition to start talks with our partners in order to make Germany a country free of nuclear weapons."

    Since the Berlin Wall came down in November 1989, the US has removed 95 per cent of the weapons, but has not said how many nuclear weapons are still in Germany.

    Another key point in the coalition agreement was reform of the nation's health care system. It was expected to include a freeze on employers' contributions, meaning individuals would carry the burden of any cost increases.

    Child benefits and tax write-offs for families with children were to be increased in 2010.

    After declaring victory in the September 27 elections, Merkel ditched her previous coalition partners, the centre-left Social Democrats, in favour of the pro-business FDP.

    The incoming government's coalition agreement was expected to be approved and signed on Monday.

    SOURCE: Agencies


    YOU MIGHT ALSO LIKE

    Lost childhoods: Nigeria's fear of 'witchcraft' ruins young lives

    Lost childhoods: Nigeria's fear of 'witchcraft' ruins young lives

    Many Pentecostal churches in the Niger Delta offer to deliver people from witchcraft and possession - albeit for a fee.

    The priceless racism of the Duke of Edinburgh

    The priceless racism of the Duke of Edinburgh

    Prince Philip has done the world an extraordinary service by exposing the racist hypocrisy of "Western civilisation".

    Why a hipster, vegan, green tech economy is not sustainable

    Why a hipster, vegan, green tech economy is not sustainable

    Improving eco-efficiency within a capitalist growth-oriented system will not save the environment.