Tags: EU | Germany | Coalition

German Government Eases Coalition Dispute

Monday, 18 Jan 2010 10:42 AM

German Chancellor Angela Merkel's governing coalition has sought to put a rocky start behind it, with leaders agreeing to postpone deciding details of a tax-cutting plan that sparked public wrangling within the government.

A top official with the Free Democrats, the junior partner in Merkel's new government, conceded Monday that income tax relief his party strongly advocates may not take effect next year as it had hoped.

Merkel's center-right coalition has been mired since taking office Oct. 28 in squabbling over the wisdom of implementing of cutting taxes in 2011 when public finances already are strained by bailouts and stimulus efforts to fight the economic crisis.

The coalition agreement between Merkel's conservatives and the pro-business Free Democrats states that the vaguely defined reform — involving tax relief of nearly euro20 billion ($28.8 billion) a year in an effort to boost the economy — should take effect next January "if possible."

That led to weeks of public arguments between conservatives who questioned the plan and Free Democrats who insisted on sticking to the date.

Merkel and other coalition leaders met Sunday night in an effort to calm the squabbling, which has overshadowed the government's start.

"We have agreed on a structural tax reform and we will carry it through," Merkel told reporters Monday. "We will decide on details in the light of economic data and growth data" following a regular income tax assessment in early May, she added.

Merkel stressed her commitment to reducing the deficit.

The Free Democrats' general secretary, Christian Lindner, conceded on ARD television that the tax reform "could be later if it isn't objectively possible" to implement it in 2011.

Leaders agreed that the coalition needs to end the cacophony of recent weeks. "That is over, and it's going to remain over," said Horst Seehofer, the leader of the conservative Christian Social Union — the Bavaria-only sister party to Merkel's Christian Democrats.

Polls have found Germans unimpressed with the government's start. A survey last week found that 61 percent thought the coalition parties have worked badly together so far; another found Merkel's approval rating dropping to 59 percent this month from 70 percent in December.

Merkel's government faces a major test in a May 9 election in North Rhine-Westphalia, Germany's most populous state, run by the same coalition as the national government.

If it loses, it will lose its majority in parliament's upper house — hampering its ability to push through legislation.

A first tax-relief package, worth roughly euro4.6 billion annually, took effect Jan. 1 — including adjustments to corporate tax rules, a cut in the value-added tax rate for hoteliers and an increase in child benefits.

Two recent polls have found a majority against further tax cuts in 2011.

Preliminary figures show that Germany's budget deficit reached 3.2 percent of gross domestic product last year — exceeding the 3 percent maximum stipulated by European Union rules. It is expected to grow this year.

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German Chancellor Angela Merkel's governing coalition has sought to put a rocky start behind it, with leaders agreeing to postpone deciding details of a tax-cutting plan that sparked public wrangling within the government.A top official with the Free Democrats, the junior...
EU,Germany,Coalition
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2010-42-18
Monday, 18 Jan 2010 10:42 AM
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