German shadow economy booms

7th September 2004, Comments 0 comments

7 September 2004 , BERLIN - Germany's shadow economy is worth up to EUR 400 billion annually, said Finance Minister Hans Eichel in a speech to parliament Tuesday. "This is a scandal," said Eichel, adding that illegal employment cost the state about 100 billion euros in lost tax revenue and social welfare payments each year. Eichel pledged tougher measures to combat illegal employment but he said this would not be enough. "We need a new legal consciousness in Germany to dry out this swamp," he said.

7 September 2004 

BERLIN - Germany's shadow economy is worth up to EUR 400 billion annually, said Finance Minister Hans Eichel in a speech to parliament Tuesday.

"This is a scandal," said Eichel, adding that illegal employment cost the state about 100 billion euros in lost tax revenue and social welfare payments each year.

Eichel pledged tougher measures to combat illegal employment but he said this would not be enough.

"We need a new legal consciousness in Germany to dry out this swamp," he said.

Eichel warned parliament that Germany's economic upswing was being fuelled by exports and standing "on one leg" with the Finance Minister vowing to continue reforms aimed at boosting the country's longstanding weak domestic demand.

He said the government stood by its prognosis that GDP would grow by between 1.5 and two percent this year, ending three years of German economic stagnation.

Top economic institutes have upgraded projections for Germany in past months but Eichel said he would wait until November tax revenue estimates before making any revisions to official government targets.

"The recovery is still standing on only one leg: exports," said Eichel, adding: "Domestic demand continues to be weak."

The "second leg" for Germany's upswing was domestic demand and Eichel said this meant the government's controversial cuts to social welfare programmes would continue in order to stimulate growth and spending.

"There will be no pause in pushing through reforms," he vowed.

Responding to weekly protests against planned cuts to jobless benefits, Eichel admitted it was difficult to explain the programme to the public.

On Monday about 75,000 people took part in demonstrations against the unemployment benefit cuts mainly in economically depressed eastern Germany.

This is about the same number who turned out on the previous two Mondays leading some observers to predict the anti-reform protests are running out of steam. In early August well over 100,000 people joined demonstrations.

Chancellor Gerhard Schroeder's centre-left government has passed a series of reforms including tax cuts, healthcare changes requiring small payments for visits to the doctor and limited labour market liberalisation.

Unemployment, however, remains stuck at over 10 percent nationwide and close to 20 percent in formerly communist eastern Germany which is still struggling to restructure and rebuild almost 15 years after the collapse of the Berlin Wall.

DPA

Subject: German news

  

 

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