Merkel allies row back on tax hikes before SPD meeting

Reuters News
Posted: Sep 26, 2013 11:17 AM
Merkel allies row back on tax hikes before SPD meeting

BERLIN (Reuters) - Leading members of Angela Merkel's conservatives scrambled on Thursday to quash an impression they might accept tax hikes as part of a coalition deal with the Social Democrats (SPD), a day after strongly signaling they could live with such increases.

Despite having delivered the best result for her party in two decades in a German election on Sunday, Merkel finds herself in the uncomfortable position of having to partner with either the rival SPD or the Greens in order to secure a third term.

Both of these parties want to increase the top income tax rate to 49 percent from 42 percent.

Although Merkel rejected that as harmful to the economy during her campaign, some of her top deputies, including Finance Minister Wolfgang Schaeuble, signaled on Wednesday they could accept some form of hike, before rowing back on Thursday.

"The position we had in our campaign stands: we reject tax increases," said Hermann Groehe, who managed the election campaign for the chancellor's Christian Democrats (CDU).

"The very good election result gives us a strong mandate to fight for this position."

Michael Fuchs, a senior CDU lawmaker, said he had personally spoken with Merkel and that she had ruled out tax increases.

The debate in the CDU comes a day before an important meeting of SPD leaders in Berlin, where the party is expected to decide whether to enter coalition talks with Merkel.

There is deep opposition within the SPD to partnering with her again because millions of voters abandoned the party the last time it hooked up with Merkel in her first term.

Johannes Kahrs, a moderate SPD lawmaker, put the bar high on Thursday, listing a series of "non-negotiable" policies for his party, including a minimum wage, a raise in the top income tax rate and equal treatment of gays and lesbians.

Leading SPD opponents of a 'grand coalition' are demanding that all card-carrying party members - more than 472,000 people - be allowed to vote on any coalition deal.

More will be known of the party's stance on Friday night, after the meeting of 200 regional and national SPD leaders.

(Reporting by Noah Barkin, editing by Gareth Jones)