German cabinet meets to plan growth measures

9th January 2006, Comments 0 comments

9 January 2006, BERLIN - German Chancellor Angela Merkel's cabinet began a special two-day meeting Monday to consider a package of measures aimed at boosting growth and jobs in Europe's biggest economy against the backdrop of tensions in her new coalition government.

9 January 2006

BERLIN - German Chancellor Angela Merkel's cabinet began a special two-day meeting Monday to consider a package of measures aimed at boosting growth and jobs in Europe's biggest economy against the backdrop of tensions in her new coalition government.

Merkel said she expected positive signals for growth and employment in Germany to emerge from the gathering, which was being held at the 300-year-old Genshagen Palace south of Berlin.

But while ministers gathered at the palace, government leaders were attempting to head off pressure to raise the package's value above the 25 billion euros (30.4 billion dollars) Berlin originally planned to spend under the programme which includes funds earmarked for science and infrastructure projects.

At the same time, the meeting was also expected to consider calls to reopen the debate about nuclear energy in Germany as well as the next steps in reforming the nation's lumbering health insurance system and the possibility of subsiding wages for the long-term unemployed.

Health insurance reform was essentially one of the key unresolved issues left over from the negotiations to form Merkel's grand coalition government comprising her conservative political bloc and their Social Democrat Party (SPD) former rivals.

Vice Chancellor and Labour Minister Franz Muentefering made it clear that 25 billion euros was the limit to be spent under the four- year government investment programme.

This followed calls made early by the general secretary of Muentefering's SPD, Hubertus Heil, to consider topping up the package, which also includes investment in transport projects, tax breaks for small-to-medium sized businesses and a renewed fight against red tape.

As well as assistance for parents, the programme is also likely to include measures to help underpin Germany's hard-pressed building sector, such as encouraging households to repair and renovate their homes.

"If there was a little bit extra, then that would be good, because we have to have more economic impulses this year," Heil told German public television ARD.

"We need growth," Heil said, adding that it was more important than discussing new measures to help underpin Germany's fragile labour market.

The push to introduce the new package comes in the wake of a batch of better-than-forecast economic data and sentiment surveys with some analysts having already revised up their German growth projections to two per cent this year - more than double the 2005 expansion rate.

But economists have criticised Merkel's government for so far failing to set out any comprehensive proposals for reforming the job market and tackling the array of labour regulations that economists believe hinder job creation in the country.

In addition, economists believe that German economic growth should start to level off in 2007 as Berlin's plans for cutting the nation's deficit and slashing public spending kick in.

While the SPD and Merkel's conservative alliance agreed to continue the policy of former Chancellor Gerhard Schroeder's SPD-led government of phasing out nuclear power stations, the gas war between Ukraine and Russia has resulted on a renewed focus on energy in Germany.

As a consequence, members of Merkel's party have argued that the moves to phase out atomic energy should be abandoned.

DPA

Subject: German news

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