German economics minister pushes Merkel for tax cuts

7th December 2008, Comments 0 comments

Glos: ‘People who work hard to advance the gross national product should get more from the fruits of their labor.’

Berlin -- German Economy Minister Michael Glos defied Chancellor Angela Merkel Sunday by issuing an urgent call for quick tax cuts to battle a deepening recession in Europe's biggest economy.

Glos, a member of Merkel's conservative bloc, told the mass-market Bild am Sonntag newspaper that Germans needed tax relief before the general election in September 2009 if they are to contribute to an economic revival.

"A tax cut for average earners ahead of the election would send the right message," he said." People who work hard to advance the gross national product should get more from the fruits of their labor."

Merkel told a congress of her Christian Democrats last week that "all options will be on the table" when she convenes her "grand coalition" in early January to evaluate how Germany is weathering the global recession.

But she has repeatedly ruled out across-the-board tax reform until after the general election, despite persistent calls for tax relief from business leaders and the Christian Social Union (CSU), her CDU's Bavarian sister party.

Glos, a member of the CSU, insisted tax breaks could have a powerful "psychological" effect and motivate Germany's notoriously tight-fisted consumers to get out and shop.

"The tax decrease could be introduced on July 1 or made retroactively effective January 1, 2009," Glos said. "Where there is a will there is a way."

Merkel told the Bild in an interview to be published Monday that she now planned to bring together top members of her cabinet with economic experts next week to assess the crisis.

The meeting next Sunday will include the foreign minister and vice chancellor, Frank-Walter Steinmeier, Glos, Finance Minister Peer Steinbrueck and Labor Minister Olaf Scholz as well as representatives from the banking sector and leading economists.

"It is to conduct a joint analysis with the greatest possible clarity about economic development in 2009," she said. "I stand by my view that I plan to keep all options open. But I do not believe in speculating about new possibilities in public every day."

Bild said there would be no concrete measures agreed at the gathering.

Also Sunday, the head of the Federation of German Industry, Juergen Thumann, renewed his call for quick tax cuts to fight the economic crisis.

"It would have a positive effect on growth and employment," he said in a statement.

And executives from eight major German companies, including Volkswagen, Adidas and BASF, were quoted in the upcoming issue of Der Spiegel news weekly saying the government has not done enough to combat the economic slowdown.

"We are facing a situation that is absolutely extraordinary -- and we cannot emerge from it with the traditional political and economic approaches," Volkswagen boss Martin Winterkorn said.

But Finance Minister Steinbrueck, a Social Democrat, underscored his opposition to tax cuts now, noting that the calls for lower taxes came amid plans to boost public spending on education, research and development aid.

"Can you tell me how, against this backdrop, such an absurd debate about tax relief in Germany can spread like wildfire throughout the republic?" he told a symposium in the northern city of Hamburg.

The CDU and CSU campaign together as a bloc in national elections. Despite the economic downturn, they enjoy a double-digit lead in the polls against their closest rival, the Social Democrats, who are junior partners in Merkel's grand coalition.


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