Merkel to roll out unpopular austerity package

7th June 2010, Comments 0 comments

Chancellor Angela Merkel prepared on Monday to unveil deep government spending cuts intended to shore up the finances of Europe's top economy, in a package full of bitter pills for German voters.

Merkel, who has already seen the popularity of her eight-month-old centre-right coalition plummet in recent months, pledged to chop around 10 billion euros (12 billion dollars) per year from the budget through 2014.

The German government last year passed a constitutional amendment requiring an approximately balanced budget by 2016. The austerity package is intended to bring the budget into compliance with that law.

"It is essential that investments directed towards the future gain in importance and the instruments of social policy are organised more efficiently," Merkel said going into the meeting on Sunday.

She remained tight-lipped on Monday as the talks resumed but called a news conference for 1300 GMT.

The chancellor had asked ministers in her fractious coalition, comprised of her conservative bloc and pro-business Free Democrats (FDP), to put forward proposals for belt-tightening.

After two days of meetings, the cabinet was to expected to present savings recommendations notably in the areas of social welfare programmes, the armed forces and parental leave benefits.

According to Der Spiegel magazine, the government is also considering cutting 15,000 jobs from the federal administration by 2014 to start bringing in 800 million euros of savings in next year.

Merkel said she prefers spending cuts over revenue rises but a special tax on flights, higher taxes for tobacco and the elimination of certain tax exemptions are believed to be on the table.

The chancellor is presenting the painful cutbacks at a low-point in her five years in power.

German voters are angry over two recent mammoth bail-out packages -- for Greece and for other debt-stricken members of the eurozone -- at a time when the country's own public finances are in a shaky state.

Merkel's coalition suffered a devastating defeat in a state election last month which resulted in her losing her majority in the upper house of parliament.

And last week, popular German President Horst Koehler made the shock announcement he was resigning, days after the abrupt departure of a key state premier from Merkel's party.

The press compared the moves by Merkel's hand-picked head of state and a key conservative bulwark to "rats deserting a sinking ship".

A poll released last week showed Merkel's conservative Christian Union bloc with just 30 percent support -- their lowest score since 2006.

The FDP is polling at seven percent -- about half of what they drew in the general election last September.

"The opposition will pile scorn and ridicule on the results of the meeting and the criticism will gain traction with voters," the centre-left daily Sueddeutsche Zeitung wrote Monday ahead of the budget announcements.

"The government has no good-will left to credibly present even sensible decisions."

Germany has also come in for criticism in Europe and the United States for stifling spending as the global economy struggles to emerge from recession.

© 2010 AFP

0 Comments To This Article