Germany’s newly elected government unveiled its plans for the next four years on Saturday, spearheaded by 24 billion euros (US$36 billion) in tax cuts in spite of the country’s mammoth debt mountain.
“It is all geared to creating jobs,” German Chancellor Angela Merkel said, calling the coalition pact, finalized after three weeks of tough negotiations in the early hours of Saturday, Germany’s “answer to the crisis.”
“We have agreed a coalition program showing that we want to advance courageously into the future,” she said.
“We are aiming for growth, for the creation of an education republic and social cohesion,” Merkel said.
“The burden on families has to be lessened, the burden on companies and inheritance tax has to be reformed,” Merkel told reporters.
Merkel, 55, won a second term in elections on Sept. 27, ditching her previous coalition partners, the center-left Social Democrats, in favor of the pro-business Free Democrats (FDP).
The cuts, some of which will take effect from Jan. 1, come despite the parlous state of Germany’s public finances, with the national debt currently standing at around 1.5 trillion euros — and growing fast.
Germany already spends tens of billions in interest payments on its debts each year, and it will borrow hundreds of billions of euros more over the next few years as the country reels from its worst recession since World War II.
The new government argues that the economic growth that the cuts will trigger will help cover the cost, together with as yet unspecified reductions in public spending.
The FDP, led by Guido Westerwelle, 47, who will serve as the vice chancellor and foreign minister, had promised voters 35 billion euros in tax cuts, but Merkel wanted 15 billion euros, making this the thorniest issue in the coalition talks.
Westerwelle said that Germany’s taxation system would be simplified, and that the new government wanted the country to become “the best in the world” in education and research in order to ensure long-term prosperity.
“Courage for the future — that is the central theme,” he said.
Following announcement of the tax cuts, Merkel’s SPD predecessor Gerhard Schroeder, chancellor from 1998 to 2005, told ARD public television that “we will have to accept another exceptionally high debt.”
“But at the same time we have to remember that as soon as the crisis is overcome we must reduce this excessively high debt,” he said.
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