Berlin 23-12-2009
Finance Minister Wolfgang Schaeuble has indicated that the German federal government has decided to apply a huge national savings plan next year in order to get the nation’s tattered public finances back to fiscal stability.
Towering spending by the German government to promote and reset Europe’s biggest economy and assist it out of the present recession has cost the public purse enormously.
Add to this the bulky and ever increasing amount needed to pay for the increasingly unpopular and misguided war in Afghanistan, plus public sector workers demanding a 5% salary increase and this all adds up to a perfect financial storm for the newly elected centre-right Merkel government.
This same government has promised to cut taxes while at the same time will have to find a way to fund state spending. It will probably just have to be off-set by other tax hikes – not a very enticing proposition.
Schaeuble has said that by July 2010 the German government will have figured out exactly and in detail all aspects of the austerity plan which will then cover the next 4 years.
What is being asked is to find a cut of around 10 billion Euros per year.
Even Mr Schaeuble could offer no direct details how this was to be achieved but a plan put forward today to increase the unemployment contribution costs paid by workers and employers by about 50% is one indication of which way this government is thinking.
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