German parliament clears huge austerity package

28th October 2010, Comments 0 comments

German lawmakers on Thursday agreed an austerity package worth tens of billions of euros aimed at reducing the deficit mountain weighing on Europe's largest economy.

The package contained the lion's share of measures passed by Chancellor Angela Merkel's cabinet last month, which bid to shave some 80 billion euros (111 billion dollars) from German spending by 2014, the largest austerity plan since World War II.

The savings will come through reforms, including slashing certain welfare payments, cutting parental subsidies to high-earners and reducing public sector expenditure.

The package also included a tax that will add between eight and 45 euros to tickets on flights departing from German airports, earning Merkel one billion euros per year and the ire of airlines.

But certain parts of the original package were not included, such as a tax on financial market transactions from 2012 that would only come into force if substantial international opposition were to be overcome.

Germany has recovered faster than expected from its worst recession in more than six decades last year, as global demand for its exports has risen strongly.

Last week, Berlin more than doubled its forecast for output growth to 3.4 percent for this year. The government sees growth of 1.8 percent in 2011.

Despite the rosier outlook, Economy Minister Rainer Bruederle stressed that the savings measures would go ahead as planned.

On the same day, the finance ministry announced that the country's deficit would be 4.0 percent of gross domestic product (GDP) this year, down from a previous estimate of six percent.

Germany hopes to get under the European Union deficit bar of three percent next year.

© 2010 AFP

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