Top German economists critical of tax relief

22nd November 2009, Comments 0 comments

The influential panel of economists has forecast growth of 1.6 percent for 2010, which it says is not enough to replenish the public coffers.

Berlin -- A panel of top German economists, which has slammed the country's huge public debt, says Chancellor Angela Merkel's new government should take back its "gift baskets" of tax relief, a German weekly reported.

Merkel "promised us that the government would do everything so that our gloomy forecasts would not happen... They can therefore pack up again their beautiful gift baskets," Wolfgang Franz, head of the so-called "Five Wise Ones", told Der Spiegel in the issue to be published Monday.

The influential panel of economists has forecast growth of 1.6 percent for 2010, which it says is not enough to replenish the public coffers. Two weeks ago they criticised the lack of "concrete information" from the new centre-right government about their plans to reduce the deficit and deal with expected massive drop in tax revenue.

A tax relief package, already voted on by the German parliament amounting to some 8.5 billion euros (12.6 billion dollars), is set to take effect in January.

In the panel's annual report released earlier this month, the economists issued a sharp attack on the new government saying its plans to reduce the country's ballooning debt were "vague" and "deceptive".

Merkel, re-elected in September at the head of a new coalition, failed to recognise the scale of the challenges facing Europe's biggest economy, it said.

In particular the new coalition of conservatives (CDU) and liberals (FDP) has failed to spell out how it will reduce Germany's budget deficit and an "exit strategy" for reducing massive stimulus measures propping up the economy, the panel said.

Michel Fuchs, deputy head of the CDU parliamentary group, called the panel's criticisms "not only presumptuous and false, but also dangerous".

"We are an independent group.... We deliberately express ourselves in terms that are clear and not very diplomatic," Franz told Der Spiegel.

"Our mandate is to warn against bad developments, not to sing someone's praises."

He said "the government cannot rely only on growth, which will not be enough to generate the 37 billion euros which we estimate are needed between now and 2016 to consolidate" the public finances.

Data from the national statistics office earlier this month indicated that the German economy made a comeback in the second and third quarters of 2009 from its worst post-war recession, in large part owing to huge injections of cash -- some 80 billion euros -- from the state.

AFP/Expatica

0 Comments To This Article