Pressure grows on Eichel over budget crisis

10th May 2004, Comments 0 comments

10 May 2004, HAMBURG - The pressure on Germany's embattled finance minister, Hans Eichel, is set to grow this week when the ministry reveals tax revenue estimates predicted to show a massive budget shortfall. The conservative daily Die Welt Monday said Eichel's days were numbered, with Chancellor Gerhard Schroeder waiting only until next month's European Parliament elections before reshuffling his cabinet. Germany now expects to collect EUR 50 billion less in tax revenues until the end of 2007, with Eichel

10 May 2004

HAMBURG - The pressure on Germany's embattled finance minister, Hans Eichel, is set to grow this week when the ministry reveals tax revenue estimates predicted to show a massive budget shortfall.

The conservative daily Die Welt Monday said Eichel's days were numbered, with Chancellor Gerhard Schroeder waiting only until next month's European Parliament elections before reshuffling his cabinet.

Germany now expects to collect EUR 50 billion less in tax revenues until the end of 2007, with Eichel admitting that the government may again breach the stability pact rules for the 12-eurozone for a fourth successive year.

Although Eichel insists on continuing with stringent savings, there are growing calls within the coalition of Social Democrats (SPD) and Greens for the stability pact rules to be softened and for new spending to help revive the economy.

A government-led tax panel's official revenue forecasts are likely to make grim reading when they are published on Thursday.

The finance ministry estimates tax receipts this year may fall EUR 7.5 billion short of the level estimated last November. Next year the shortfall could come in at EUR 14 billion.

Eichel is hoping economic growth next year could help plug the budget gap but continuing high unemployment and low consumer spending has kept the economy sluggish so far this year.

Germany's six leading economic research institutes have already scaled back their growth forecasts, predicting an economic growth rate of 1.5 percent for this year and 2005.

The country's conservative press believes Eichel is unlikely to survive. The broadsheet Die Welt said it was "the week of truth" for the finance minister for whom the latest tax revenue estimates would leave his budget planning in ruins.

"That Eichel will have to go has long been seen as certain in Berlin, the only question is when," it said in an editorial.

According to a front-page report, Schroeder is "evidently already holding talks with possible successors". Former Hamburg state economics minister Thomas Mirow and Defence Minister Peter Struck are named as likely candidates for Eichel's post.

A government spokesman denied a similar report in Sunday's Bild am Sonntag newspaper, saying: "Speculation about a cabinet reshuffle does not become more correct by being constantly repeated."

SPD chairman Franz Muentefering has already ruled out "spectacular changes" to the government's reform plans despite concerns spending cuts are stifling economic growth and leading to even greater tax revenue shortfalls.

Opposition politicians are meanwhile scathing of renewed warnings Germany's budget deficit may again breach the stability pact threshold of 3 percent of Gross Domestic Product.

Calling for more cuts in welfare spending, Christian Democrat (CDU) general-secretary Laurenz Meyer said the government should now say honestly it could no longer adhere to the stability pact and "stop making promises it cannot keep".

Eichel, who has seen his latest suggestion of raising value added tax rejected by cabinet colleagues, is faced with the only alternative he has left - plugging the gap with new borrowing, Die Welt said.

According to Der Spiegel news magazine, Eichel has himself threatened to resign if the government does a u-turn on spending cuts.

Until Thursday's tax estimates are published, the government has signalled there will be no firm policy decisions. Eichel, meanwhile, has "the full confidence of the coalition", Muentefering has said.

DPA

Subject: German news

 

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