Tax discord hits German opposition as ratings fall

25th July 2005, Comments 0 comments

25 July 2005, BERLIN - Discord over tax cuts grew Monday in Germany's opposition after the Free Democratic Party formally rejected tax rises sought by the Christian Democratic alliance which is seeking to topple Chancellor Gerhard Schroeder.

25 July 2005

BERLIN - Discord over tax cuts grew Monday in Germany's opposition after the Free Democratic Party formally rejected tax rises sought by the Christian Democratic alliance which is seeking to topple Chancellor Gerhard Schroeder.

"We are totally crystal clear on this: We reject any increase of value-added-tax," said Free Democratic (FDP) leader Guido Westerwelle at a news conference presenting his party's election programme.

The tiny FDP hopes to play kingmaker for Christian Democratic alliance (CDU/CSU) candidate Angela Merkel who is challenging Schroeder in elections due to be held on September 18, pending a final green light from Germany's highest court.

But disagreements over tax policy have helped cut into what had been a commanding lead held by the opposition CDU/CSU-FDP over Schroeder's left-leaning Social Democratic (SPD)-Greens government.

In sharp contrast to the FPD, Merkel's CDU/CSU wants to raise German value-added-tax to 18 per cent from its present rate of 16 per cent.

The proposal has been criticized by many economists given that sluggish domestic demand is a major cause of Germany's weak economy.

Westerwelle said there should be no new taxes and called instead on the state to cut spending.

The FDP programme demands further cuts to income tax and a radically simplified tax system with just three rates: 15 per cent for low earners, 25 per cent for medium incomes and 35 per cent for those with the highest incomes.

After months of commanding leads in opinion polls for Merkel's centre-right bloc, the latest Infratest-Dimap poll shows a rising new Left Party alliance could hinder an opposition majority.

A Merkel coalition of CDU/CSU-FDP would currently win 49 per cent, compared to 36 per cent for Schroeder's SPD-Greens government, the poll showed.

The Left Party - which is dominated by the revamped former East German communists allied with a smaller western German movement, the WASG - would get 12 per cent, according to the poll.

The Left Party is being helped by two charismatic leaders: the rebel former head of Schroeder's SPD, Oskar Lafontaine, and Gregor Gysi who helped rebuild the post-communists after former East Germany's implosion in 1989 to 1990.

There is growing speculation that if the Left Party continues to gain support it could force creation of an awkward 'grand coalition' government between Merkel's CDU/CSU and Schroeder's SPD - which both leaders insist they do not want.

Schroeder and senior SPD members rule out a possible coalition with the Left Party but such a move is favoured by a minority group of SPD left-wingers.

DPA

Subject: German news

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