Thursday

9th Apr 2020

Huge tax cut for Germany

The German government has decided to take further steps towards reinvigorating its staggering economy. Chancellor Gerhard Schröder yesterday (29 June) announced plans to radically reduce income tax starting from next year.

It is hoped the reduction, worth 18 billion euro, will encourage German consumers to spend more and, as a result, boost Europe's biggest economy. "10 per cent less tax means 10% more consumption," Mr Schröder was quoted as saying by the BBC.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

Berlin hopes to fill the budget holes created by the cut through higher borrowing and selling shares from state-owned enterprises.

But the move is likely to further undercut EU rules.

In 2002, Germany breached the Euro-zone rules that proscribe a budget deficit of more than 3% of GDP. German finance minister, Hans Eichel, has announced that Berlin is most likely to breach the terms of the so-called Stability Pact again this year unless there is an "economic miracle".

However, the plan has already been criticised by several experts and the German opposition. They say this plan will put further weight on the country's poorly shaped budget and result in yet larger public debts.

"We will surely vote as expected, that is - not in favour", says Bavarian prime minister and CSU leader, Edmund Stoiber, in the German newspaper, Spiegel Online.

Last week, before the expected announcement on the cuts, European Central Bank chief Wim Duisenberg said that the German government was heading in the wrong direction. "German debts will rise even though they should be falling," he said.

But not all are against this move. "If the proposed tax cuts will not result in a serious increase of the budget deficit, the step is in general a good thing," comments the President of the Bundesbank, Ernst Welteke in the Financial Times Deutschland.

German tax shock - 126bn euro missing

The Germans have received yet another shock relating to their bad economy. In a press conference in Berlin, Finance Minister Hans Eichel, yesterday (15 May) announced that for the period 2003 to 2006 the German state would take in some 126bn euro less than was expected.

Experts slash German growth forecast

An economy in crisis. Local experts forecast economic recession while Brussels warns of continuous unsatisfactory performance.

No breakthrough at EU budget summit

EU leaders failed to reach agreement on the EU's long-term budget, as richer states and poorer 'cohesion countries' locked horns. The impasse continues over how to fund the Brexit gap.

EU leaders struggling to break budget deadlock

Cuts to innovation, space, neighbourhood and other programme-spending push down the latest budget proposal on the table of EU leaders. Rebates could stay on, to win the support of the net-payers for a deal.

Unhappy EU leaders begin budget haggle

EU leaders arriving at the Brussels summit criticised the budget proposal of EU Council president Charles Michel, as richer member states insisted holding onto their rebates, while poorer countries wanted to avoid deep cuts to their subsidies.

News in Brief

  1. EU injunction blocks Polish judicial tribunal
  2. EU's science chief resigns over 'disappointing' Covid-19 action
  3. EU urged to help abused women under lockdown
  4. Luxembourg to take 12 Greece-based refugees
  5. Thirteen EPP national groups call for suspending Fidesz
  6. WhatsApp imposes restriction on message forwarding
  7. EU military operations continue despite virus
  8. EU to ask firms to hedge against future pandemics

Coronavirus

ECB promises (almost) whatever it takes

The eurozone's central bank has promised to buy up to €750bn of government and private bonds in new pandemic counter-measures.

Opinion

What does coronavirus 'Black Swan' mean for markets?

Falling demand and prices for oil and raw materials will revive the risk of deflation. The collapse in international trade and long-term rethinking of China's role as the major hub for the production of consumer goods and electronics is inevitable.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Join EUobserver

Support quality EU news

Join us