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.

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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.

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