German parliament approves pre-election cut in pension dues

Reuters News
Posted: Oct 25, 2012 12:19 PM
German parliament approves pre-election cut in pension dues

BERLIN (Reuters) - Germany's lower house of parliament approved a controversial cut in state pension contributions on Thursday, a move that could deliver economic stimulus of more than 6 billion euros annually.

With one year to go until Germany holds a federal election, Chancellor Angela Merkel's government is considering a raft of measures to ease the burden on taxpayers, a luxury it can afford because of booming tax revenues and still-robust growth.

But opposition parties have dismissed the steps as irresponsible pre-election gifts that Germany's ageing population cannot afford.

The Bundestag also agreed to raise the amount employees can earn in low-income, state-subsidized so-called "mini-jobs", by 50 euros to 450 euros. That step is likely to cost the state another 300 million euros a year.

Both measures have yet to pass through the Bundesrat upper house of parliament, where Merkel's coalition no longer has a majority and which earlier this year blocked a government plan to provide 6 billion euros of tax relief.

Even as its euro zone peers struggle with austerity measures and rising joblessness, Germany has seen unemployment drop to its lowest rate since reunification and wages rise, enabling it to reduce its debt more quickly than expected.

Leaders worldwide have called upon Germany to do more to stimulate its own economy and thereby that of the euro zone, but Berlin has been cautious about undertaking any large tax cuts, a step that many Germans see as irresponsible in the light of the debt crisis.

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Nonetheless, Merkel has a federal election to fight in 2013, and her government has taken small steps to stimulate the economy. One of these is the plan, passed by the Bundestag on Thursday, to cut contributions to the state pension scheme to 18.9 percent from 19.6 percent.

(Reporting by Holger Hansen and Thorsten Severin, Writing By Sarah Marsh; Editing by Noah Barkin)