Germany to meet deficit rule in 2007: Merkel

3rd November 2005, Comments 0 comments

3 November 2005, BERLIN - Designated German chancellor Angela Merkel vowed Thursday that Berlin would cut spending and meet the eurozone's budget deficit rule by 2007 under a grand coalition accord which will be presented on time next week.

3 November 2005

BERLIN - Designated German chancellor Angela Merkel vowed Thursday that Berlin would cut spending and meet the eurozone's budget deficit rule by 2007 under a grand coalition accord which will be presented on time next week.

Germany is poised to violate the 3 per cent of GDP eurozone budget deficit rule for a fourth year in a row in 2005 and many analysts predict a further overshoot next year.

"It is not just meeting the ... criteria - this is a question of justice for the future," said Merkel in a speech to business leaders adding: "For me it is a question of destiny."

Merkel said her government would make 35 billion euros (42 billion dollars) of spending cuts in the coming months.

But she said there was still no agreement on exactly where the cuts would be made.

Merkel's Christian Democratic alliance (CDU/CSU) is negotiating to set up a grand coalition government with outgoing Chancellor Gerhard Schroeder's Social Democrats.

Merkel narrowly won Germany's September 18 general election.

Moves to forge a grand coalition were pitched into crisis earlier this week when the chairman of Schroeder's SPD abruptly resigned. This was followed by the sudden announcement by CSU Bavarian Premier Edmund Stoiber that he would not serve as economics minister as had been previously agreed.

But the SPD moved swiftly to nominate a new leader, Matthias Platzeck, the popular Prime Minister of eastern Brandenburg state with whom Merkel, who also hails from Brandenburg, has a good working relationship.

The CSU named Michael Glos to be economics minister. The 30-year veteran of Germany's parliament was warmly welcomed by German business leaders.

Merkel insisted that despite political turbulence of past days, the coalition deal would be presented at the end of next week.

"We are determined to bring negotiations to a good conclusion," she said. "The atmosphere in the talks is good."

The CDU/CSU and SPD must hold party conventions to approve the deal before Merkel is due to be formally elected as chancellor by the German parliament on November 22.

Looking to her future government, Merkel said Germany needed major reforms in coming years in order to compete with a globalised economy and strong new competition from Asia.

"It makes no sense to complain about China and India because their people are so hard-working," said Merkel.

Germany needed to cut bureaucracy, make its labour markets more flexible, replace nation-wide wage agreements for industrial sectors with ad hoc settlements, and trim back the country's tough laws limiting the sacking of workers - an especially sensitive issue.

"I am firmly convinced we must make changes with laws protecting against sacking in order to give people a chance to find work who would not otherwise be hired," said Merkel to applause of business leaders.

Trade unions strongly defend the laws against sacking but many business leaders say they would hire more people if they could be certain that workers could be laid off during downturns.

German unemployment of 11 per cent was one of the main campaign issues.

DPA

Subject: German news

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