German politicians allege post-election plan to cut budget

Reuters News
Posted: Dec 23, 2012 9:39 AM

By Erik Kirschbaum

BERLIN (Reuters) - The junior political partners of German Chancellor Angela Merkel warned on Sunday against any attempt to raise taxes after next year's election as Europe's champion of budget discipline struggles to balance its books.

The Finance Ministry has denied a Der Spiegel news magazine report that Finance Minister Wolfgang Schaeuble wants to raise value-added tax to a uniform 19 percent, eliminating a discounted 7 percent rate on many items to bring in an extra 23 billion euros ($30 billion) each year.

It also denied on Friday that Schaeuble planned to cut social spending, to help bring German debt back within the limit that Berlin insisted on setting as a condition for countries to gain admission to the currency union.

Germany has been pushing for budget austerity in other euro zone countries. Until now, Germans have been largely spared such measures but while Germany's debt is falling relative to gross domestic product, it is still at 81.5 percent, well above the 60 percent euro zone ceiling.

Volker Wissing, parliamentary floor leader of Germany's Free Democrats (FDP), told Welt am Sonntag newspaper his party would not support any measures that raise burdens on taxpayers. "If he (Schaeuble) wants to raise revenues (with a VAT increase), then he'll have to give taxpayers something back somewhere else," Wissing said.

The FDP has fought hard to keep the discounted VAT rate for select industries, such as hotels, and items such as food, books and public transport.

Der Spiegel also said the Finance Ministry has drafted plans for an extensive austerity program after September's election that would cut social spending and hit pensioners in order to help the federal government balance its budget by 2016.

"The report is wrong," said a Finance Ministry spokesman. "There are no such plans for after the election." But he said the ministry was working on getting a balanced budget in 2013.

The opposition Social Democrats (SPD) and Left party also condemned the reported plans to cut social spending.

Germany will have a balanced budget in 2012 thanks to robust economic growth. The finance ministry expects surpluses of 0.5 percent of GDP in 2013 and 2014.

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The SPD and their Greens allies hope to defeat Merkel's centre-right coalition in September. Opinion polls show the SPD-Greens at about 43 percent while Merkel's Christian Democrats CDU and their Bavarian allies are at about 40 percent. The FDP are below the 5 percent threshold needed for seats.

Joachim Poss, SPD deputy parliamentary floor leader, also accused Schaeuble of trying to keep plans to raise taxes and cut spending secret until after the January 20, 2013 election in Lower Saxony state, where polls show Merkel's CDU in danger of losing power to the centre-left SPD and Greens.

According to Der Spiegel, the Finance Ministry also wants to cut subsidies for the health care system by 10 billion euros a year, extend the retirement age, stiffen the penalties for early retirees and cut widows' and widowers' pensions.

($1 = 0.7590 euros)

(Reporting by Erik Kirschbaum; Editing by Ruth Pitchford)