The Debt Brake Grabs: Coalition Unveils Austerity Plan

style="float: right; margin-bottom: 10px; font-weight: 600;"Tue 29th Jun, 2010

MUNICH. Chancellor Angela Merkel of the Christian Democratic Union and Vice Chancellor Guido Westerwelle of the Free Democratic Party presented the ruling coalition's austerity plan yesterday in Berlin.

Bavarian Minister President Horst Seehofer, head of the coalition's third member party, the Christian Social Union, was notably absent at the presentation. Designed to save more than 80Eur billion by 2014, the plan aims to comply with a law passed last year known as the "Schuldenbremse", or debt brake, which limits government borrowing to a maximum of 0.35 percent of gross domestic product by 2016.

In a victory for Westerwelle, the plan contains no increases in value-added or sales taxes. Instead, the proposals include cutting government jobs and the defense budget, as well reducing unempoyment benefits. New taxes will be levied on nuclear power plants and airline passengers. The opposition Social Democrat, Green and Left parties rushed to criticize the government's proposals, mostly on the basis of proposed cuts in social spending. Other critics note that the proposed savings of 11.2 billion euro for 2011 amount to only four percent of the year's budget and do not go far enough.

The pan-European strategy of emphasizing saving meets with considerable skepticism both at home and abroad, however, since many analysts fear a reduction in consumer spending which will result in overall contraction of Europe's economies. A lively debate over the coalition's plan in the Bundestag is certain.


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